- For Attorneys
During the past decade, mortgages were sold and resold, bundled into securities and sold to investors. It is usually legal for a lender to assign a borrower's contract to another as long as the terms of the contract don't prohibit the assignment. However, it is common for mortgages to be sold or assigned to another company, and the borrower is not relieved of obligations for payments. etc. by the assignment.
In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed. Persuading a judge to compel production of hard-to-find or nonexistent documents can, at the very least, delay foreclosure, buying the homeowner some time and increasing the pressure on the lender to renegotiate the mortgage. The original note is almost always electronically retained and can eventually be found.
Judges are often willing to accept electronic documentation. Lenders are sometimes allowed to produce other paperwork to establish they are the holder of a loan. There have been cases where the foreclosure action was thrown out because of a failure to produce the note, but it will be a matter of subjective determination for the court to decide if the foreclosure may proceed.
In foreclosure lawsuits, the debtor typically asks the court for three things, in the following order:
-a temporary restraining order (which lasts for a certain number of days, typically under 2 weeks)
-a preliminary injunction (will last until the court decides the case), and
-a permanent injunction (which will be granted if you win your case).
An answer is a legally sufficient response to the allegations that have been alleged against you in the complaint. The answer will generally either admit or deny each claim made by paragraph, or state an inability to admit or deny for lack of knowledge. Defenses may also be raised. Lack of funds and inability to pay is not considered a valid defense. A valid defense may include such excuses as identifying the incorrect borrowing party to the loan contract, or having made all payments on time, among others. The answer is an opportunity to show why the property shouldn't be foreclosed upon. Lack of funds and inability to pay is not considered a valid defense. A valid defense may include such excuses as identifying the incorrect borrowing party to the loan contract, or having made all payments on time, among others. The answer is an opportunity to show why the property shouldn't be foreclosed upon.
Types of Foreclosure.
The mortgage holder can usually initiate foreclosure anytime after a default on the mortgage. Within the United States, there exist several types of foreclosure. Two are widely used, with the rest being possibilities only in a few states.
The most important type of foreclosure is foreclosure by judicial sale. This is available in every state and is the required method in many. It involves the sale of the mortgaged property done under the supervision of a court, with the proceeds going first to satisfy the mortgage, and then to satisfy other lien holders, and finally to the mortgagor. Because it is a legal action, all the proper parties must be notified of the foreclosure, and there will be both pleadings and some sort of judicial decision, usually after a short trial.
The second type of foreclosure, foreclosure by power of sale, involves the sale of the property by the mortgage holder not through the supervision of a court. Where it is available, foreclosure by power of sale is generally a more expedient way of foreclosing on a property than foreclosure by judicial sale. The majority of states allow this method of foreclosure, inclusing New Hampshire. Again, proceeds from the sale go first to the mortgage holder, then to other lien holders, and finally to the mortgagor.
Other types of foreclosure are only available in limited places and are therefore considered minor methods of foreclosure. Strict foreclosure is one example. Under strict foreclosure, when a mortgagor defaults, a court orders the mortgagor to pay the mortgage within a certain period of time. If the mortgagor fails, the mortgage holder automatically gains title, with no obligation to sell the property. Strict foreclosure was the original method of foreclosure, but today it is only available in New Hampshire and Vermont.
Statutory redemption allows the mortgagor to redeem the mortgage even after foreclosure sale. About one-half the states have statutory redemption laws. Generally, these laws give anywhere from six months to a year for the mortgagor to redeem the mortgage by payment of the foreclosure sale price plus a statutory rate of interest to the sale purchaser. Junior lien holders also have a right to redeem under these statutes, in order of their priority, though not until the period for the mortgagor to redeem runs out. As a rule, the mortgagor can retain possession of their property during this statutory redemption period. New Hampshire has no post-sale statutory right of redemption for foreclosures, which would allow a party whose property has been foreclosed to reclaim that property.
Federal Laws Affecting Foreclosure:
At least two federal laws clearly apply to foreclosure actions.
The filing of any bankruptcy action automatically stays a foreclosure proceeding, regardless of type. At that point, whether the stay will be lifted depends on whether the mortgagor has equity in the mortgaged property. If the bankruptcy has been filed under a Chapter 11 petition, the bankruptcy court may "terminate, annul, modify or condition such stay" for cause, including the lack of adequate protection of an interest in property of the mortgage holder, or if the mortgagor does not have equity in the property and the property is not necessary for an effective reorganization.
If it has been filed as a straight bankruptcy petition, asking for discharge of all debts, the mortgage holder will be allowed to foreclose if the bankrupt debtor has no equity in the property. If there is equity in the property, the property can be sold by the bankruptcy court.
Servicemembers Civil Relief Act of 2003.
The Servicemembers Civil Relief Act of 2003, replacing the Soldiers and Sailors Relief Act of 1940, gives special protection to mortgagors on active duty in the armed forces for mortgage loans executed prior to when they went into service. The Act provides that a service person can apply to a court to set aside a default judgment leading to a foreclosure action. Because of this provision, a mortgage holder initiating a foreclosure action against a mortgagor who fails to answer the foreclosure complaint must file an affidavit with the court stating the mortgagor is not on active duty in the armed services.
If the mortgagor is in the armed services, the individual must be present or represented at the foreclosure hearing, meaning foreclosure by power of sale is not available. If a court finds that the mortgagor's ability to meet the terms of the mortgage has been affected by their service in the armed forces, they can stay the foreclosure action as long as the person is in the service.
The following are NH statutes:
479:27 Mortgagee May Buy.
A mortgagee selling under a power contained in a mortgage may be a
purchaser at the sale, unless the mortgage contains a provision to the
479:25 Sale Under the Power.
Instead of such suit and decree of sale, the mortgagee or his assignee
may, upon breach of the condition, give such notices and do all such acts
as are authorized or required by the power, including the giving of a
foreclosure deed upon the completion of said foreclosure; but no sale
under and by virtue of such power shall be valid and effectual to
foreclose such mortgage unless the following conditions are complied
I. Notice of such sale shall be published once a week for 3 successive
weeks in some newspaper of general circulation within the town or county
in which the property is situated. In the event that the mortgaged
premises are situated in more than one county, publication in a newspaper
of statewide circulation shall be sufficient. The first publication shall
be not less than 20 days before the date of sale, calculated by excluding
the date of publication of the first notice and the date of sale.
II. A copy of said notice shall be served upon the mortgagor or sent by
registered or certified mail to his last known address or to such person
as may be agreed upon in the mortgage at least 25 days before the sale.
The term "mortgagor" shall include the mortgagor and any grantee,
assignee, devisee or heir of the mortgagor holding a recorded interest in
the mortgaged premises subordinate to the lien of the mortgage, provided
that such interest is recorded, at least 30 days before the date of the
sale, in the registry of deeds for the county in which the mortgaged
premises are situated. Like notice shall be sent to any person having a
lien of record on the mortgaged premises, provided that the lien is
recorded at least 30 days before the date of the sale in the registry of
deeds. The notice shall be sent not less than 21 days before the sale.
Such notice of sale shall be sufficient if it fully sets forth the date,
time, and place of sale; the town, county, street or highway and street
number, if any, of the mortgaged premises; the date of the mortgage; the
volume and page of the recording of the mortgage; and the terms of the
sale. Any mortgagor or record lienholder who refuses to accept or claim
mailed or served notice or who frustrates attempts by the mortgagee to
give notice of the sale by failing to give or leave a forwarding address
or by other act or omission shall be deemed to be notified of the sale,
provided that such mortgagee shall have made a good faith effort to
provide such notice. Notice of the sale as served on or mailed to the
mortgagor shall include the following language:
"You are hereby notified that you have a right to petition the superior
court for the county in which the mortgaged premises are situated, with
service upon the mortgagee, and upon such bond as the court may require,
to enjoin the scheduled foreclosure sale." Failure to institute such
petition and complete service upon the foreclosing party, or his agent,
conducting the sale prior to sale shall thereafter bar any action or
right of action of the mortgagor based on the validity of the
II-a. No claim challenging the form of notice, manner of giving
notice, or the conduct of the foreclosure sale shall be brought by the
mortgagor or any record lienholder after one year and one day from the
date of the recording of the foreclosure deed for such sale.
III. The sale shall be held upon the premises except where a different
place of sale is agreed upon in the mortgage. In the event that the
mortgage shall contain more than one parcel of land, the sale may be held
on either parcel as may be specified in the notice of sale.
IV. No foreclosure sale shall be invalid or ineffectual to foreclose
a mortgage pursuant to this section if any party entitled to be sent
notice and not sent such notice shall, either before or after such
foreclosure sale, waive its right to have been sent such notice, or if
the lien or interest of such party in the mortgaged premises shall at any
time be released or discharged. A waiver of notice authorized or
validated under this section shall be recorded in the registry of deeds
in the county where the property is situated.