Foreclosure is the legal proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owner's failure to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust." Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, it is typically said that "the lender has foreclosed its mortgage or lien."
What You Need To Know About Foreclosure
The Nebraska Trust Deeds Act is the statue that governs foreclosures in this state. Under this statue, foreclosure is a non-judicial remedy. The deed of trust, which secures the title to the property, is transferred to the foreclosing entity in a power of sale. This is a faster method to carry out a foreclosure on a property, as it does not contain a right to redemption. For this reason, it is the primary route for foreclosure. Nebraska also has judicial foreclosures, which allows mortgages that serve as liens on real property to be foreclosed through the courts. This method allows for a right to redemption and takes longer to put into effect.
Non-judicial foreclosures require notice to be given once a default has occurred. The trust deed generally contains a power of sale clause which allows a trustee to sell the property in order to pay off the defaulted loan. The trustee is a representative of the lender and must meet very stringent notice requirements.
The requirements for the power of sale notice, which must be followed, are as follows:
- The lender must serve a notice of default and a notice of sale must be recorded with the register of deeds prior to initiating the foreclosure. A copy of the notice of default must be sent to the borrower and other junior lien holders and those who have requested notice not less than after recordation of the notice to default.
- A notice of foreclosure sale must be sent to the borrower and all other interested parties prior to the sale. The sale must take place at a place, time and manner as noted in the notice of sale.
- In general, the notice of sale will be advertised for 5 consecutive weeks, with the last publication at least 10 days, but no more than 30 days, before the sale. If there is no trustor [borrower] address in the trust deed and no request for notice is made in the loan documents, the notice of default must be published at least 3 times, once a week for 3 weeks Publication must begin no later than 10 days after the notice of default is filed.
The trust deed must contain the proper legal documents in order to effectuate this type of foreclosure. If the trustee or lender choose, they may follow the judicial foreclosure method instead.
If the trust deed does not contain the power of sale language, the lender is not eligible to foreclose under the Nebraska Trust Deeds Act, and must seek judicial foreclosure. In a judicial foreclosure, the property is sold as part of a publicly noticed sale. In that circumstance, a complaint is filed in court along with a lis pendens. A lis pendens is a recorded document that gives public notice that a specific property is being foreclosed upon.
It will take between 90 – 120 days for the completion of an uncontested non-judicial foreclosure. A judicial foreclosure can take between three and nine months, depending on whether the borrower delays the sale. The borrower may also stall a judicial foreclosure through filing for bankruptcy or by seeking a delay or postponement.
Once a property has been foreclosed upon, the borrower cannot attempt to redeem it. Nebraska has no post-sale statutory right of redemption. The borrower may initiate a redemption prior to the final confirmation of the foreclosure sale, if the borrower pays all monies due in full, including taxes and costs.
Borrowers should be aware that in Nebraska, a lender may seek a deficiency judgment. This is sought when the foreclosed property does not sell for enough to cover the amount of the underlying mortgage. The deficiency judgment must be initiated within 90 days of the sale, and cannot be for more than the amount of the debt subtracted by the fair market value.
How Bankruptcy Can Stop a Foreclosure
A Foreclosure by Sale ends in the posting of a sign advertising the auction of your home on the sale date. The only ways to stop a foreclosure are full payment of the arrearage or the filing of a Chapter 13 bankruptcy.
- Full Payment: If you are able to obtain and tender the full amount of your arrearage, including fees and costs, you can stop the foreclosure of a standard residential mortgage.
- Chapter 13 Bankruptcy: Most people lack the money to make full payment. This process stops the foreclosure and allows you to repay your arrearage over a three-to-five-year period. The arrearage is paid through a court-appointed official, while you resume your regular monthly payments to the bank in order to keep your home. A Chapter 13 can be filed at any time prior to the law day or sale date, and it is often the only avenue to save your home.