You’ve just received papers saying that a creditor wants to foreclose on your property. You wonder: Do I have rights? Can I fight this?
The answer to both questions is: Yes! In this post, I’ll give a brief overview of the foreclosure process, and what you can do to challenge a foreclosure.
There are two types of foreclosures: judicial foreclosures, and non-judicial foreclosures.
In a judicial foreclosure, the creditor has to go to court. To challenge a judicial foreclosure, argue against the creditor in court.
In a non-judicial foreclosure, the creditor does not have to go to court, but you can sue the creditor if you want to challenge the foreclosure.
Every foreclosure is different, and the issues that can come up in a foreclosure suit are limitless. Consequently, the ways to challenge a foreclosure vary from case to case. A challenge that would be successful in one case may not be an option in another.
In this post, I will give a basic overview of the foreclosure process, discussing each type of foreclosure separately. To explain how to fight a foreclosure, I’ll first outline the requirements of each. If in your foreclosure, the creditor has not followed any of these requirements, you may be able to contest your foreclosure based on his failure to follow the requirements.
First, a word about terminology: In a mortgage, the debtor (the person who owes the money) is called the mortgagor. The creditor (the person to whom the money is owed, who may foreclose if the money is not paid) is the mortgagee.
The first type of foreclosure: Judicial Foreclosure
In a judicial foreclosure, the mortgagee goes to court and sues the mortgagor. The mortgagee must first file a petition in court, and then he must serve you – and anyone else who has an interest in the property – with a copy of the petition and summons. The mortgagee may not obtain a judgment against anyone who has not been served.
The petition should contain all of the allegations as to why the mortgagee has the right to foreclose on your property. Read the petition carefully, and see if all of the allegations are true. If any of the allegations in the petition are not true, you should file a response with the court, denying the false allegations. After you are served, you have twenty days to file a response. If you don’t file a response within twenty days, the mortgagee may obtain a default judgment against you.
If you file a response, you may then ask the judge to schedule a hearing. At the hearing, the judge will decide if there are legal grounds for foreclosure. While the evidence that the judge must consider varies from case to case, the rules that frequently apply in foreclosure cases are as follows:
1. The mortgage document must be in writing, and must contain:
a. The names of the mortgagor and mortgagee
b. Words granting a mortgage
c. A legal description that sufficiently identifies the property (to read about legal descriptions, click here)
d. The mortgagor’s signature
e. An acknowledgment signed by a notary
2. The mortgage document also must usually be filed with the county clerk in the county where the land sits.
Common defenses in foreclosure suits include:
4. You have paid the debt as the mortgage requires
If the judge finds that the mortgagee does not have the legal right to foreclose on the mortgage, the judge should dismiss the case. If the judge finds that the mortgagee has the legal right to foreclose, the judge will enter a judgment in favor of the mortgagee. Within thirty days after the judgment, you have the right to appeal the decision to the Oklahoma Supreme Court. To see how the appeals process works, click here.
If you don’t appeal (or if you appeal and the appeals court affirms the lower court’s ruling), then the judge will order a sheriff’s sale. The sheriff’s sale is an auction where the sheriff will sell the property to the highest bidder. At many sheriff’s sales, the mortgagee purchases the property and is the only bidder.
After the sheriff’s sale, the mortgagee must file a motion to “confirm” the sale. After the mortgagee files a motion to confirm, the judge should schedule a hearing, and the mortgagee must send you notice of the hearing. At the hearing, the judge will decide whether to confirm the sheriff’s sale. You will have the right to appear at the hearing and object to the confirmation. If you object to the confirmation and the judge confirms the sale anyway, you have the right to appeal to the Oklahoma Supreme Court. The buyer does not obtain title to the property until the judge confirms the sheriff’s sale.
In Oklahoma, you have the right to “redeem” the property by paying the amount due on the mortgage. You may exercise this right to redeem at any point before the judge confirms the sheriff’s sale. If you pay this amount before confirmation, you may regain possession of the property. To see court cases on the right to redeem before confirmation, click here and here.
After the sheriff’s sale, if the mortgagee does not recover the amount that you owe on the mortgage, the mortgagee may sue you for the deficiency. To read about deficiency judgments in mortgage foreclosures, see my earlier post here.
Non-judicial foreclosure (also called power of sale mortgage foreclosure)
In a non-judicial foreclosure, the mortgagee can foreclose on the property without going to court. A mortgagee may only pursue a non-judicial foreclosure if the mortgage document contains “substantially” the following language:
"A power of sale has been granted in this mortgage. A power of sale may allow the mortgagee to take the mortgaged property and sell it without going to court in a foreclosure action upon default by the mortgagor under this mortgage."
This language must appear in the mortgage in bold, underlined language.
Before the mortgagee may institute a non-judicial foreclosure, the mortgagee must send you written notice, by certified mail, to your last known address. The notice must state:
The nature of your breach or default
That you have 35 days after the date the notice is sent to cure the breach or default
The amount of money necessary to cure the breach or default
That if you do not cure the breach or default within 35 days, the mortgagee may sell the property
That the notice contains important information concerning your legal rights, and that if you have any questions, you should consult an attorney
If the property is not your homestead, and you are in default more than three times in a 24-month period, the mortgagee does not need to send you notice before he forecloses on the property.
If the property is your homestead, and you are in default more than four times in a 24-month period, the mortgagee does not need to send you notice before he forecloses on the property.
The Oklahoma Constitution defines “homestead” as follows:
If the property is not within the city limits of any city or town, the homestead may consist of not more than 160 acres, and be “owned and occupied and used for both residential and commercial agricultural purposes”
If the property is within the city limits, the homestead may consist of not more than one acre, and be “owned and occupied as a residence only, or used for both residential and business purposes”
If you do not cure the default within 35 days after you receive the notice (or if no notice is required) the mortgagee may sell the property. At least thirty days before selling the property, the mortgagee must serve you with notice of the sale. The mortgagee must serve this notice either by the sheriff, by a licensed process server, or by certified mail. This notice must state:
The date, time, and location of the sale
The nature of the breach or default of the mortgage
The legal description and street address of the property
That you have the right to redeem the property by paying all the principal, interest, and other sums due the mortgagee at any time prior to the execution of the deed to the buyer
That, if the property is your homestead, you have the right to elect a judicial foreclosure any time at least ten days before the sale. The notice must state this in bold, underlined letters. To choose a judicial foreclosure, you must send notice to the mortgagee, by certified mail, that you would like the property to be sold by judicial foreclosure. You must file this notice in the county clerk’s office. If you send this notice, then the mortgagee must proceed with judicial foreclosure, and he may not pursue a non-judicial foreclosure. (If he files a judicial foreclosure, he may argue, in court, that the property is not your homestead. If a judge rules that the property is not your homestead, the mortgagee may then reinstitute the non-judicial foreclosure.)
That, if the property is your homestead, you have the right to elect against a deficiency judgment at least ten days before the sale. The notice must state this in bold, underlined letters. To elect against a deficiency judgment, you must send notice to the mortgagee, by certified mail, that you elect against a deficiency judgment. If you send this notice, then, if the mortgagee sells the property for an amount less than the amount in default, he may not sue you for a deficiency judgment. (He may, however, file an action in court, contesting your claim that the property is your homestead. If he files this action, and the judge rules that the property is not your homestead, the mortgagee may then pursue a deficiency judgment against you.)
The mortgagee must record this notice in the county clerk’s office.
If the mortgagee holds a sale, he must sell the property to the highest bidder. The highest bidder must post cash or certified funds worth at least ten percent of the purchase price, within 24 hours of the sale. If the highest bidder does not do this, the mortgagee may sell the property to the next highest bidder. Either the mortgagee or the mortgagor may purchase the property at a non-judicial sale.
How to contest a non-judicial foreclosure
If the mortgagee has failed to follow any of the above procedures in a non-judicial foreclosure, if the mortgagee makes any allegations against you that are not true, or if you have not breached the mortgage, then, you may file a lawsuit in court, asking that the court nullify the foreclosure sale.
Need help fighting a foreclosure? Contact the Persaud Law Office
If a mortgagee has filed a foreclosure against you, you have rights. Use them. If you are in the middle of foreclosure, the Persaud Law Office can help you. Contact us today.