“Well, actually, if you can stay in your home that is a better deal for the neighborhood. It's certainly a better deal for the person that is in their home, rather than to be on the street and for that house to go into foreclosure and become a problem for the whole community”. These words from former United States Representative John Garamendi (California) help to highlight the issues that surround foreclosure and urge the importance of learning about the foreclosure process.
When a person (“Borrower”) takes out a loan to purchase a residential property in Pennsylvania, he/she typically signs a promissory note and a mortgage. A promissory note is basically an IOU that contains the promise to repay the loan, as well as the terms for repayment. The mortgage provides security for the loan that is evidenced by a promissory note.
Most loans include a grace period after which time the loan servicer (“Lender”) can assess a late fee under the terms of the promissory note. Generally, if a Borrower misses more than one payment, federal mortgage servicing laws requires the Lender to contact the Borrower by phone and in writing following missed payments. This creates an opportunity for the Borrower to possibly avoid foreclosure through options like loan modification, forbearance, or payment plans.
Notice of Intent to Foreclose
Federal law generally requires that the Lender waits until a Borrower is more than 120 days delinquent before officially starting a foreclosure. Pennsylvania requires that the loan servicer seeking to foreclose give a 30-day notice of intent to foreclose, which gives the Borrower the opportunity to cure the default. If the home is abandoned, notice is not required. A new ruling now requires that Lenders send a new notice of intent to foreclose before starting a second foreclosure. In addition, notice must be provided explaining the Borrower’s rights and describing what help is available - programs such as the PA Housing Finance Agency’s Homeowners’ Emergency Mortgage Assistance Program (HEMAP). The notice must also tell the Borrower of the default and give 30 days (plus 3 days to account for mailing time) to have a face-to-face meeting with a local consumer credit counseling agency to try to resolve the default.
The Foreclosure Process
Foreclosures in Pennsylvania are judicial and are a civil action which means that the Lender (Plaintiff) must file a foreclosure complaint against a Borrower (Defendant), also called the mortgagor(s) and real owner(s) of the property, and both parties must follow the Pennsylvania Rules of Civil Procedure. In some states, lenders do not have to go through the court system to foreclose – these are known as non-judicial foreclosures.
A foreclosure is for repossession of property only. A Lender cannot put a Borrower in jail, cannot take personal property or bank accounts. If the house that was foreclosed does not sell at a Sheriff’s sale for the amount that is owed by a Borrower, a Lender would have to file a separate action against the Borrower for the deficiency.
Berks County Court of Common Pleas Mortgage Foreclosure Diversion Program
Residents of Berks County may be eligible for a Foreclosure Diversion Program that is available for free to those who qualify. Notice of the program will be sent along with other paperwork from the Court. This program assists people to save their homes.
Listed below are common defenses that a Borrower may be able to assert in a foreclosure action.
Breach of Contract
Violation of Duty of Good Faith and Fair Dealing
Other Statutory and Common Law Defenses