Few things can threaten one’s sense of safety like a notice of foreclosure. A home is most people’s most important asset. But for many, it is also filled with memories of watching children grow up and spending time with loved ones. There must be some way to stop the foreclosure and save the home, right?
Stopping foreclosure, or reinstatement of the loan is not available in all states. Each state sets the deadline for loan reinstatement, so the ability to stop a foreclosure ranges from never all the way up to the time of the sale. Additionally, some states allow the owner to redeem the property after the sale.
For people who do not work in the field, foreclosure laws are complicated because there is not a nationwide process. You need to understand the elements of foreclosure so that you can better determine when it is too late to stop foreclosure in your situation.
Read on to learn just that in this article.
When Is It Too Late to Stop Foreclosure?
Television and movies give us the idea that we can race to the courthouse steps to save our property from a foreclosure auction. That image is wildly skewed thanks to the patchwork of state laws that make foreclosures processes vary by state.
Foreclosure law is laden with confusing terms that describe the homeowner’s ability to take action at different stages of the foreclosure. Knowing these basics of foreclosure is the first step to determining what your options are.
Judicial Versus Non-Judicial Foreclosure
Whether your state uses judicial, non-judicial, or a combination of both impacts your options to stop a foreclosure. Judicial foreclosures go through the court system. Homeowners have the opportunity to participate in the proceeding. The judge will ultimately grant or deny the request to foreclose.
Judicial foreclosures take several months, and sometimes even longer if the courts are backlogged. This gives you more time to find new housing as the bank goes through these steps:
- The bank sends you a letter with its intent to foreclose. Under federal law, banks must wait until you are at least 120 days delinquent on the loan.
- The bank files the lawsuit with the court. The bank will then be required to serve you with the notice of the case.
- The homeowner has the opportunity to file a written response with the court. There may be a hearing.
- The court enters orders regarding whether the home is to be sold.
- Your right to be in the home will end.
Non-judicial foreclosures do not take place in the court system. Instead, lenders follow a process set in state law to proceed with the foreclosure. The terminology will vary by state:
- The bank provides notice of intent to foreclose. This may be a ‘notice of default,’ a ‘notice of sale,’ or through a notice posted on your home.
- There will not be an oversight from the court unless you file a lawsuit. In the lawsuit, you can claim that you are not behind in payments or that the bank is not actually the mortgage holder.
- The property will be sold at auction, and your right to be in the home will end.
Reinstatement of the Loan Prior to Auction
Most states allow for the loan to be reinstated prior to the sale of the property. Reinstatement means that the homeowner pays the entire past-due amount, including interest and fees, to bring it out of default.
Reinstatement is what most people are referring to when they ask about stopping a foreclosure. Unfortunately, it is not available in all places. Several states, including Alabama, Connecticut, Delaware, Florida, Hawaii, and Kansas, do not require the ability to reinstate under state law.
Additionally, some states give lenders the out of permitting reinstatement if they have already been through this process with the homeowner before. Be sure to check your state’s rules to see the timeframe for reinstatement. Some, like Mississippi, allow reinstatement all the way up to the time of sale. Others set deadlines before the sale or within 30 days of receiving a foreclosure notice.
Redemption of the Loan
A few states allow property owners to buy back the property directly after the sale. Depending on the state, this means paying the new owner or the bank. In states that require payment to the purchaser, the payment must cover the purchase price and all fees. If paying the mortgagor, the owner pays the entirety of the loan plus expenses, fees, and costs incurred in doing the foreclosure.
Here are a few states that allow for redemption: Alabama, Delaware, Kansas, Missouri, and Michigan. You’ll notice that many states that did not permit reinstatement do permit redemption. Be aware that the redemption deadline is quite short in most places. The redemption period ends, at the latest, when the court confirms the sale.
Can You Stop Foreclosure on the Day of the Sale?
Some states do allow property owners to stop the foreclosure on the day of the sale. To do this, the property owner must reinstate the loan.
To reinstate the loan, the property owner must pay the full delinquent amount, interest, and any fees or costs associated with the foreclosure. Here are the states that allow reinstatement on the day of sale.
- Alaska. The owner can reinstate anytime before the sale.
- Arkansas. Reinstatement is allowed prior to sale.
- Georgia. High-cost loans may be reinstated until the title is transferred.
- Indiana. High-cost loans may be reinstated until the title is transferred. Other loans may be reinstated prior to sale.
- Maine. It is at the lender’s discretion to allow the owner to reinstate at any time prior to the sale.
- Minnesota. Reinstatement may happen any time before the sale.
- Mississippi. Reinstatement may happen any time before the sale.
- Montana. Reinstatement may happen any time before the sale.
- Pennsylvania. Reinstatement can occur up to one hour before bidding begins.
- Wisconsin. Reinstatement may happen any time before the sale.
Can I Stop Foreclosure by Paying the Past Due Payment?
Most states allow for the loan to be reinstated prior to the sale of the property. Reinstatement means that the homeowner pays the entire past-due amount, including interest and fees, to bring it out of default.
Depending on the state, if the owner again defaults after reinstatement, the foreclosure resumes. Additionally, states may cap the number of times a property owner can reinstate the loan.
How Many Months Can You be Late for Foreclosure?
For the most part, federal law precludes the initiation of foreclosure until the loan is behind 120 days. During that time, the lender will be doing things behind the scenes to get ready to start the foreclosure.
Ten to fifteen days after the first missed payment, the owner begins incurring late fees. To reinstate the loan, the owner will have to pay these fees in addition to the missed payments and any other costs described in the loan document.
After the third missed payment, the owner will receive a notice of default from the lender. That notice specifies the total amount due and a deadline to prevent the foreclosure from proceeding.
Is It Ever Too Late to Stop Foreclosure?
There is always a point in the process where it is too late to stop the foreclosure. To know when it is too late for you, check your state’s foreclosure laws regarding reinstatement and redemption.
Most states that allow reinstatement do not allow for redemption, and vice versa.
If your state allows for reinstatement, the point where it is too late to stop foreclosure is the reinstatement deadline. This may be a number of days after the first notice or a certain time before the sale.
Some states do not allow for the bringing of the loan prior to foreclosure sale. When this happens, the owner may purchase back, or redeem, the property after the sale.
There are of course deadlines for redemption as well. Most states require redemption to occur prior to the judicial confirmation of the sale. Others set a specific time limit.
When Is It Too Late to Stop Foreclosure in Florida
Florida is a judicial foreclosure state where it can take a year or longer to complete the process. This gives property owners a lot of time to find a solution and stop the foreclosure.
At the end of the foreclosure court proceeding, the homeowner receives a copy of the foreclosure judgment in the mail. That judgment will indicate when the right to redeem the property ends. That is the absolute final point to stop the foreclosure.
Usually, the right to redeem ends when the clerk files the certificate of sale, but the judgement can also specify an alternate date. To redeem the property, the owner must pay the full sale or mortgage cost plus fees and costs.
When Is It Too Late to Stop Foreclosure in Texas?
Texas does not require that foreclosures go through the courts. Of course, the homeowner can file a lawsuit if they wish to challenge the foreclosure.
Texas cuts off any chance of stopping foreclosure quite early in the process compared to other states. To stop a foreclosure, the owner must reinstate the loan no later than 20 days after the foreclosing party serves the notice of default.
Remember, the notice of default is sent after only three missed payments. This allows for lenders to move full-speed ahead with the foreclosure at 120 days, and the homeowner is out of options.
Texas does not allow for the redemption of the property, only reinstatement.
When Is It Too Late to Stop Foreclosure in Oklahoma?
Oklahoma is another judicial foreclosure state where the property owner can redeem the property after the sale. The right to redeem ends when the court confirms the sale.
To redeem the property, the owner must pay the full sale or mortgage cost plus fees and costs.
When Is It Too Late to Stop Foreclosure in California?
California does not require that foreclosures go through the courts. State law does require several points of contact from the lender before proceeding with the foreclosure.
Prior to recording the notice of default, the loan servicer must make several attempts to contact the borrower. The borrower can request a meeting to assess loan repayment options at that point.
If the servicer is unable to reach the borrower, the servicer must make several more attempts by phone, mail, and online. Then, the servicer will issue a notice of sale.
The sale will take place at least 3 months after the notice of sale is issued. The borrower has up until 5 business days prior to the sale to reinstate the loan.
To reinstate the loan, the borrower will have to pay the entire default amount, interest, late fees, and costs related to the foreclosure.
Other Ways to Stop a Foreclosure
The number one way to deal with foreclosure is proactive communication with the loan servicer. Remember, it is expensive for the bank to go through the foreclosure, and they may not be able to recoup the entire cost of the loan.
Many lenders are willing to work with borrowers to get the loan back on track. There may even be forbearance programs that the borrower qualifies for to delay the process.
Ignoring or avoiding the lender will only lead to a quicker foreclosure completion. If nothing else, work with them to buy yourself more time to secure a new home.
When possible, it is best to avoid foreclosure. It impacts the ability to get another mortgage in the future. Some states allow for deficiency judgments. This is a monetary judgment for the difference between the property sale price and the loan balance. This leaves former owners with no property and a large debt to pay off.
Final Thoughts
If the borrower can come up with a large chunk of money to reinstate or redeem the loan, foreclosures can be stopped. The trick is that the laws vary so much by the state that borrowers must determine the date of their last chance. You may be interested in our guide on How to Stop Eviction after Foreclosure