WHAT IS FORECLOSURE?
Foreclosure is a legal process by which the lien-holder (the lender) takes possession of collateral (the home) when the borrower fails to make payments or otherwise defaults under the terms of the agreement (the mortgage).
THE PENNSYLVANIA FORECLOSURE PROCESS
Pennsylvania is a Judicial Foreclosure State with no Right of Redemption. Deficiency Judgments are allowed.
- Judicial Foreclosure: To recover monies owed or foreclose on the collateral, (your home), the lender must bring a court action (file a lawsuit) against the borrower. A hearing date is set at which time the borrower and lender must appear before the judge. If the borrower does not respond to the complaint / appear in court, a “Default Judgment” is entered in favor of the lender and an order of sale is issued by the judge.
- Right of Redemption: A redemption period is a period of time, following the actual foreclosure sale, during which the home owner has the right to re-purchase the home. There is no redemption period following foreclosure in the State of Pennsylvania. In Pennsylvania, when the foreclosure gavel strikes the sale is final.
- Deficiency Judgment: The lender has the right to pursue a judgment against the borrower for the amount they are unable to recuperate in a foreclosure or a short sale.
THE PENNSYLVANIA FORECLOSURE TIMELINEForeclosure in Pennsylvania can take approximately 8 – 12 months or longer (currently longer), beginning with the first missed payment and ending with the actual eviction process. The timeline is approximate and will vary depending on the particular lender, the homeowner’s actions, and the court’s caseload at a given time.
January 1: Miss 1st mortgage payment.
January 16: 1st mortgage payment is now late and fees are added. The account is referred to the Collections Department. They call or write, kindly reminding the homeowner that
payment is past due and to please make payment immediately.
February 1: Miss 2nd mortgage payment.
February 16: 2nd mortgage payment is now late and more fees are added. The collection calls and letters are more frequent and more demanding. The 1st payment is now 30 days past due and hits the Credit Bureau and your credit report as a 30 day late. It is important to note here that credit becomes negatively affected this early on in the process.
March 1: Miss 3rd mortgage payment.
March 16: 3rd mortgage payment is now late. Late fees are added. Credit is again damaged. When a homeowner has missed 3 payments (is 60 days late), the legal foreclosure process is moving ahead. The lender sends ACT 6 and ACT 91 Notices to the homeowner.
ACT 6 Notice (Intent to Foreclose)
This is the Official Notice of Intent to Foreclose sent to the homeowner from the lender prior to initiation of any foreclosure proceedings. It is not sent until the homeowner is at least 60 days behind on their mortgage payments. The lender must send this notice to the homeowner by first class mail, to their last known address and if different, to the property secured by the mortgage. It officially notifies the homeowner that the mortgage is in default and unless action is taken to cure the default within 30 days, the lender intends to accelerate the mortgage payments (the outstanding balance of the original mortgage becomes due immediately).
ACT 91 Notice (Take Action to Save Your Home from Foreclosure)
This notice, also sent from the lender, informs the homeowner that he/she has 30 days from the date of the ACT 91 Notice to (1) cure the default or (2) contact a HEMAP Consumer Credit Counseling Agency. (3) If the homeowner takes no action within the 30 day period, the lender will instruct their attorney to file a law suit and proceed with foreclosure. The ACT 91 Notice provides information about HEMAP, (The Housing Emergency Mortgage Assistance Program) and a list of Consumer Credit Counseling Agencies including contact information.Note: The ACT 91 Notice IS NOT sent to homeowners with FHA Title 2 Loans, homeowners more than 24 months delinquent or with past due amounts greater than $60,000.00, or when the home is not owner occupied.
1. CURE THE DEFAULT: Within 30 days from the date of the ACT 91 Notice the borrower may cure the default by bringing the mortgage current. The borrower must pay the total amount past due plus late fees. There also may be associated attorney or legal fees.
A. If the default is cured before the lender refers the account to their attorney, the borrower will not incur any legal fees.
B. If the default is cured after the lender has referred the account to their attorney, but prior to commencement of legal proceedings, the homeowner will be responsible for legal fees up to and not in excess of $50.00.
C. If the default is cured after the lender’s attorney has begun legal proceedings, the homeowner will be responsible for ALL legal fees (even those in excess of $50.00).
2. MEET WITH A CONSUMER CREDIT COUNSELOR: Within 30 days from the date of the ACT 91 notice the borrower may meet with a Consumer Credit Counselor located in the county where the mortgaged property is located. Borrower has 30 days from the date of this meeting to file a HEMAP application. The Consumer Credit Counselor will supply the application and assist the borrower in completing it. They are the only agency approved for submission of the application. HEMAP may take up to 60 days to make a decision. During this time no foreclosure proceedings may be brought against the borrower.
3. HOMEOWNER TAKES NO ACTION: If the homeowner takes no action within 30 days from the date of the act 91 Notice the lender will exercise their right to accelerate the mortgage debt. The entire outstanding balance becomes due immediately and the borrower loses the right to pay the mortgage in monthly installments. The lender refers the account to their foreclosure attorney who begins the legal process of foreclosing on the mortgaged property.