BiggerPockets

Can a lender (CU) who has a second mortgage on a property, which is going to foreclosure, sue the homeowner for the amount owed?

The first lender is foreclosing on the house.
Thanks

The second has the opportunity to buy at auction. I do believe they may not be able to do a deficiency after. Common sense guess....not quiet sure though.

Not sure. I would consult with a RE attorney in your state (or the state in which the subject property resides).

How much time is given to vacate the property once the foreclosure process is completed?

I seem to recall a website which tells you if your state is a judicial or non-judicial state. Does anyone know what it is? Jim

The man with all the answers, thank you Jon. Jim

Be careful with state-by-state foreclosure law overviews. They are generally inaccurate and do not give you information you can count on. Here is the overview for my state, WA, and by way of example, I've gone through it and pointed out the good and bad, in bold . . .

Synopsis of Washington Foreclosure Laws

Judicial Foreclosure Available: Yes (true)

Non-Judicial Foreclosure Available: Yes (true)

Primary Security Instruments: Deed of Trust, Mortgage (true, but 98% DOT)

Timeline: Typically 120 days (not true - minimum is 190 days nonjudicially and could be a year or more judicially)

Right of Redemption: Yes, but may be precluded (misleading - DOT no redemption. NONE - judicially yes, but may be precluded if the property is abandoned)

Deficiency Judgments Allowed: Yes (misleading - DOT NO deficiency, except against commercial borrowers and co-signers and only sometimes, judicially yes)

In Washington, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process. (a little screwy - true for DOT, not true for mortgages)

Judicial Foreclosure

The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, the property will be auctioned off to the highest bidder. (not true - DOT can choose judicial sale even if a power of sale is present)

Non-Judicial Foreclosure

The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. (not true - mortgages may not be foreclosed non-judicially).

A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the "Power of Sale Foreclosure Guidelines". (not true and really brutalized. - DOT uses a trustee and the lender may not foreclose themselves - Mortgage is ALWAYS foreclosed judicially by lender's attorney).

Power of Sale Foreclosure Guidelines

If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. (I suppose, but I've never heard or seen of such a thing) Otherwise, the non-judicial power of sale foreclosure is carried out as follows (not true - no non-judicial sale for mortgages):

The notice of sale must be transmitted both by regular mail and by certified mail, return receipt requested, to the borrower at their last known address, and by regular mail to the attorney of record for the borrower, if any, not less than thirty (30) days prior to the day of sale. (brutal and not even close. The process starts with an unrecorded notice of default and notice of foreclosure, and 90 days later a notice of trustees sale may be recorded. A sale can take place 30 days following, provided its not less than 190 days from the date of default)

The sheriff must publish a notice of the sale once a week, consecutively, for four (4) weeks, in any daily or weekly legal newspaper of of general circulation published in the county in which the property is located. (brutal - the trustee and NOT the sheriff publishes the notice of trustee's sale, and it happens twice, once between the 32nd and 28th day, and once between the 11th and 7th day prior to the sale).

Additionally, the sheriff must also post the notice in two public places, one of which must be the courthouse door, in the county where the sale is to take place for a period of not less than four weeks prior to the day of sale. (brutal - both the notice of default and notice of sale must be posted on the property, nothing on the courthouse door).

Said notice must contain the time and place of the foreclosure sale, the names of the parties to the deed, the date of the deed, recording information, a property description, the terms of the sale, and the borrowers rights (or lack of) redemption. (brutal - there's no "deed" involved here. There is a DOT, which I'm guessing is what they're trying to say).

The borrower has up to eleven (11) days before the sale stop the foreclosure process by paying the past due payments, plus expenses, including trustee and attorney fees. (screwy - the borrow may reinstate if he gets paid up prior to 11 days before the sale (actually, the 11th day is okay, too. Saying "up to 11 days" would seem to include days 1 through 10 as well. It doesn't).

The sale must be made by auction between 9:00 am in the morning and 4:00 am in the afternoon at the courthouse door (not true - sales may be held anywhere within the county) on Friday unless Friday is a legal holiday and then the sale must be held on the next following regular business day. The sale may not be conducted less than 190 days from the date of default and the highest bidder will receive a certificate of sale. (No, high bidder gets a trustee's deed)

The sheriff may postpone the sale (not exceeding one (1) week next after the day appointed) by giving notice and by posting written notices of the adjournment under the notices of sale originally posted. (not true - the sheriff has no involvement in a non-judicial sale).

Unless redemption rights have been precluded, the borrower may, within eight (8) months after the date of the sale, redeem the property by paying the amount of the highest bid at the foreclosure, plus interest. (brutal - this refers to a judicial sale and not a trustee's sale)

If the non-judicial foreclosure process is used by the lender, then it cannot sue for a deficiency judgment. (not true - a co-signer can be sued for a deficiency.)

On judicial foreclosure sales, the borrower can be sued for a deficiency, unless the property is found to be abandoned for six (6) months before the decree of foreclosure. (brutal - the 6 months has to do with redemption rights and has nothing to do with deficiency. HOWEVER, if the lender waives his right to a deficiency, then the court may grant the lender's request to reduce the redemption period from 12 months to 8, and perhaps altogether on a property deemed abandoned)

Note: Foreclosure Summary © ForeclosureLaw.org

See what I mean? Foreclosure Law.org should be ashamed of themselves . . . They've botched it so badly because they've combined the process of non judicial and judicial sales and now nothing makes sense.

Please do not refer to the WA synopsis for information about foreclosure procedures in Washington. It's a little on the dicey side.