There are many reasons a borrower may stop making payments on their mortgage loan, such as job loss, divorce, excessive debt, or the onset of a medical condition or disability.
When mortgage loans enter a default state, lenders must protect their interest in the property, typically through a foreclosure sale in order to recoup their investment. Being notified of a pending foreclosure sale of your home can be a frightening experience that affects the whole family. However, the process can be lengthy, and you do have rights and options toward retaining the property. It is critical to have a lawyer on your side if you are facing a foreclosure.
Following the 2010 U.S. foreclosure crisis, federal and state laws were amended to enact heavier regulations regarding the loan servicing and foreclosure processes and provide additional protections for homeowners. Maryland residents may have additional contractual rights beyond federal and state protections if borrowers signed a promissory note or deed of trust at the time of purchase. In Maryland, you may the right to:
- Receive preforeclosure notices, including a Notice of Intent to Foreclose, among others.
- Apply for alternative mitigation options toward keeping the home.
- Participate in foreclosure mediation proceedings to reach an agreement other than foreclosure.
- Stop the foreclosure sale by paying the back balance or paying the loan in its entirety.
- Redeem the property.
- File for bankruptcy.
- Obtain any excess funds after the foreclosure sale.
- Receive special military protections.
In Maryland, if you default on your mortgage loan payments, your lender may choose to foreclose on the home with either a judicial or nonjudicial process, as follows:
Judicial Foreclosure
Judicial foreclosures involve the court system. The lender will file a lawsuit with the civil court, requesting an order allowing a foreclosing sale of the property. In such cases, you must answer the suit and respond in writing. If you do not respond, the loan provider will automatically win the case and move forward with foreclosure proceedings. If you dispute the lawsuit, the court will review the case and evidence and make a determination. If you do not prevail, the judgement will order that the home be sold at auction.
Nonjudicial Foreclosure
If your lender chooses an out-of-court proceeding, they must follow the foreclosure procedures outlined in state statutes. In Maryland, nonjudicial foreclosures have minimal court involvement. Once all procedures are completed, the lender is free to sell the home at a foreclosure sale.
Nonjudicial foreclosures are the most common in Maryland, as the process is much faster and less expensive than judicial proceedings. The nonjudicial foreclosure process includes:
- Breach/default letter: Once you fail to make loan payments, your lender will send you a letter informing you that your loan is in default and your failure to make payments puts you in breach of contract. The lender is required to send you this notice before they can take future steps toward foreclosure. This notice allows you an opportunity to cure the loan by making up back payments to avoid foreclosure.
- Notice of Intent to Foreclose: If you do not cure the loan after receiving your letter of default, the lender may choose to proceed with foreclosure. In Maryland, the lender cannot pursue foreclosure proceedings until the following have been met:
- The loan has been in default for at least 90 or more days.
- At least 45 days have passed since issuing the Notice of Intent to Foreclose letter.
The Notice of Intent to Foreclose must also include a loss mitigation application, mediation information, and name and contact information for the current owner of the loan, which may be a different servicer than the original lender.
- Foreclosure case: To begin foreclosure proceedings, the lender will file an Order to Docket for a judicial foreclosure with the court or proceed according to state statutes for a nonjudicial foreclosure.
- Service: The lender is required to personally serve you with the information filed in the foreclosure case. If they are unsuccessful in serving you in-person, the court may allow the papers to be sent by first class or certified mail, which requires your signature of receipt.
- Before the sale: Before the lender can hold a foreclosure sale on the property, they must:
- Not pursue the sale for at least 45 days since the date you were served.
- Publish a notice of foreclosure sale in a local newspaper for three successive weeks.
- Provide you with notice of the sale date by mail no later than 10 days before the sale is scheduled to be held.
- Provide you with a final opportunity to stop the foreclosure sale by paying the arrearage in full at least one business day prior to the date of sale.
- Foreclosure sale: If you have not cured the loan, the lender will proceed with the sale of the property by public auction, which will be held at either the property or in court. Once sold, the sale must be ratified by the court, confirming the purchase, the total amount owed, and applying the proceeds to the debt. The sale must be ratified before the lender can legally evict you from the property, and in most cases, you will be expected to vacate the property the same day the sale is ratified. If the property sells for less than you owe the lender, you may be required to pay the deficiency. In Maryland, foreclosure sales of abandoned property are fast-tracked, especially if the court waives the time limits for correspondence, public notices, and serving you.
Active-duty military servicemembers are afforded additional legal protections against foreclosure as outlined in the Servicemembers Civil Relief Act. If you are active duty in danger of foreclosure, consult with an attorney who knows the ins and outs of real estate litigation. An attorney knows your rights under the Act.
Can I Legally Stop the Foreclosure Sale?
There are means toward stopping a foreclosure sale if you act before the sale. Maryland laws do not grant you the right to redeem the property once it sells. If you want to stop proceedings, you should hire an attorney as soon as possible to discuss your options, including the possibility of filing bankruptcy in order to stop the sale. The attorney may also be successful in negotiating an agreement with your lender that benefits all involved. Potential methods of halting a foreclosure sale in Maryland include:
- Loan reinstatement: You have the right to pay the back-due payments and reinstate the loan up to one business day before the sale.
- Redeem the property: You have the right to stop the proceedings by paying the loan amount in full. In Maryland, you are only permitted to redeem the loan before the sale, not after.
- File bankruptcy: As a last resort, filing bankruptcy immediately halts the sale with an “automatic stay” injunction that bars the lender from selling the property temporarily. Filing for bankruptcy is not easy and negatively impacts your creditworthiness and credit rating for up to 10 years, and it is crucial that you retain the services of an attorney.
Towson Real Estate Litigation Lawyers at Huesman, Jones & Miles, LLC Represent Clients Facing Foreclosure
If you are facing foreclosure, there may be options available to save your property. One of our experienced Towson real estate litigation lawyers at Huesman, Jones & Miles, LLC can help you determine the best option. Call us at 443-589-0150 or contact us online for a free consultation. Located in Hunt Valley and Towson, Maryland, we serve clients throughout Baltimore, Baltimore County, Bel Air, Bentley Springs, Columbia, Freeland, Hereford, Hampton, Westminster, Essex, Monkton, Sparks Glencoe, Parkton, Phoenix, Pikesville, White Hall, Carroll County, Harford County, and Howard County.
