Utah Foreclosure Summary

In Utah a lender may foreclose on a home when the borrower does not fulfill the obligations of the loan, typically for non-payment. 

How long will my mortgage company wait before foreclosing on my home?  
Lenders are all over the place.  Typically they will wait at least 90 days before starting the process, but they don’t have to.

Notice of Default
The Notice of Default is the document that officially begins the foreclosure process.  Its purpose is to warn the property owner that if they mortgage is not brought current within 90 days from the date it was recorded then the home will / may be scheduled for sale.  The trustee must mail you a certified copy of the notice of default within 10 days of recording it.

Notice of the Foreclosure 
If the mortgage is not brought current within 90 days after the Notice of Default then the foreclosure sale can be scheduled.  The sale can take place as few as 31 days after the time to cure has expired.  During this time, at least 20 days before the date of the sale, the trustee must both, send by certified mail notice of the time and place of foreclosure sale, and post notice of the sale on the property to be sold.

Sale of the Property
The trustee will then appear at the court house steps at the appointed time to either continue or conduct the sale.   If people are interested in purchasing the property then the bidding begins.  In many situations no one besides the bank shows up to bid on the property.  In that case the property can still be “sold.”  The lender can issue a “credit bid,” where no money actually changes hands, but the property is sold back to the bank for the amount of the bid.  Within 3 days a Trustee’s deed will be issued, but may not be recorded, transferring ownership of the home.

Getting Evicted
You are no longer the owner of your home and no longer have lawful possession of the property.  However, the new owner isn’t allowed to enter the home or automatically have you thrown out.  The new owner is required to file an eviction action.  In most cases a 5 day eviction notice must be provided.  The new owner will often offer some type of incentive for you to move out to avoid the cost and burden of an eviction.  After all, you are still in possession of an expensive asset and they want to ensure that it is taken good care of, especially in light of the fact that many of the appliances and objects in the home are considered personal property which you have the right to remove.

The Deficiency
There will likely be a difference between what was owed on the mortgage and what the home sold for.  That difference is called the deficiency.  In Utah we have the one-action-rule, which limits the time that a mortgage company has to try to collect the deficiency from the borrower.  In Utah the lender must commence an action to collect on the deficiency within three months after the sale of the property.  If the lender doesn’t timely commence an action then you can breathe a sigh of relief because they can’t collect the deficiency from you.  I have numerous clients who have been pursued for a deficiency.  In my experience the chance of being pursued for a deficiency is greater for those with loans from smaller local banks or credit unions and from large mortgages.

Exceptions to the One-Action-Rule
CAUTION.  Certain creditors are not satisfied by the one-action-rule.  The 90 day bar doesn’t apply to second mortgages or HELOCs.  These creditors have a six year statute of limitations.

The one-action-rule may also be avoided by the federal government for loans issued by the USDA (the U.S. Department of Agriculture).  After a foreclosure the USDA can retain the right to garnish your pay, take tax refunds and even seize up to 15% of Social Security payments.

How Can Bankruptcy Help With Foreclosure?

Bankruptcy Can Help Prevent Foreclosure.
Filing bankruptcy starts the “automatic stay,” which causes all collection activities, including foreclosures, to stop immediately.  This time can be used to try to cure the delinquency or work with the lender.  Bankruptcy also gives you the ability to make your mortgage company accept the past due payments slowly over a period of up to 5 years with no interest or penalties (in a Chapter 13 bankruptcy).  We may also be able to eliminate your second mortgage completely.  Bankruptcy will also delay a foreclosure sale if you plan on eventually leaving the home.

Bankruptcy Can Help You Gain A Fresh Start.
Since your credit is pretty much ruined after a foreclosure anyway, you’d might as well get a fresh start.  A foreclosure will show on your credit report for up to 7 years, a bankruptcy will show up for up to 10.  The only guarantee with a foreclosure is that you will have bad credit but your other debts will still be due and owing.  Bankruptcy will eliminate your credit card, medical debt, and most other debt, in addition to any deficiency owed for your past mortgage, it will even eliminate the second mortgage and HELOC that isn’t eliminated by the foreclosure.