Complaint
A title commitment is ordered immediately after receipt of the foreclosure referral package. In many cases, the title report is received within 5 days. A review of the title report discloses the necessary parties to the foreclosure and any defects in title. The chain of assignments is examined to confirm that the current holder is party plaintiff.
All parties having a lien or interest in the subject property are named in the complaint as defendants to terminate any rights they may have in the property. The complaint is filed in the circuit court for the county in which the property is located and summons issued. A Lis Pendens is recorded with the county recorder after filing the Complaint, and the summons is placed for service of process with the county sheriff or a special process server.
A foreclosure action may be filed in federal court if certain jurisdictional requirements are met: the amount in controversy must exceed $50,000 and there must be complete diversity of citizenship between the plaintiff and any defendant. No plaintiff may be a citizen of the same state of any defendant.
After the Complaint is filed, a later date title examination is ordered with an effective date after the date the Lis Pendens was recorded. The recording of the Lis Pendens serves as notice to all persons that a foreclosure action has been filed and that any interest they may acquire in the subject property is subject to the foreclosure action. The complaint must be amended to add any intervening parties coming of record between the effective date of the initial title report and the date of recording the Lis Pendens.
If the sheriff or process server is unable to serve any defendant, an alias summons is issued and service by publication is placed against any defendants who cannot be served with summons. The Court has no personal jurisdiction over parties served by publication. The defendants have 30 days from service of process to file responsive pleadings; the United States of America has 60 days to respond. The time to plead in federal court is 20 days from service. If any defendant is served by publication, the first date of publication is considered the date of service.
Judgment
After the requisite period for filing of responsive pleadings has expired, a judgment is scheduled. Notice of the hearing must be sent to all parties of record. If no responsive pleadings have been filed, a default judgment is entered. The amount due is essentially a payoff amount plus all foreclosure costs and attorney fees. An Affidavit of Mortgagee and Affidavit of Attorneys Fees and Costs is presented to the Court to prove-up the amount due.
In the majority of foreclosure actions in which responsive pleadings are filed, a judgment is entered pursuant to a Motion for Summary Judgment. The Motion is supported by an Affidavit of Mortgagee. If there is no material issue of fact raised by counter-affidavit or other pleading, the judgment will be entered. While foreclosure actions seldom go to trial, summary proceedings will undoubtedly delay the foreclosure.
The judgment will specifically set forth the redemption date, amount of the judgment and numerous other findings of fact. After entry of judgment, the plaintiff is entitled to statutory interest on the judgment amount rather than the note rate for purpose of sale bid computation.
Redemption
For residential property, the redemption period will expire the later of seven months from the date of service of process or date the Court obtains jurisdiction over the defendant or three months from the date judgment is entered. There is a six-month redemption period for non-residential property. The plaintiff may shorten the redemption period to 30 days from judgment if the plaintiff proves that the property has been abandoned. Sale may not be held until after the expiration of the redemption period.
The owner of the right of redemption must give written notice to the plaintiff's attorney of an intent to redeem at least 15 days prior to the proposed date of redemption. Upon receipt of the notice in attempt to redeem, the mortgagee must file a certification with the clerk of the court regarding advances made between judgment and the date of proposed redemption. This must be accompanied by paid receipts or affidavits and must be filed at least three days prior to the stated redemption date.
As a practical matter, a payoff pursuant to a valid payoff statement is made rather than a redemption. A full payoff assures that the client receives all sums due and owing, and they are not bound by the statutory interest rate. Title companies also encourage a full payoff and dismissal of the foreclosure action rather than a redemption.
As stated above, if less than the full indebtedness is bid at the sheriff's sale, the mortgagors have an additional 30 days after the date of sale to redeem. This special right of redemption would require that the redeeming mortgagor pay the bid, interest and any additional costs and expenses. It is very rare that the special right to redeem is exercised.
Sale
A sale date is scheduled during the redemption period to be conducted as soon after the expiration of the redemption period as possible. In federal court foreclosures, the sale is scheduled before a special commissioner, and in state court foreclosures, the sale is scheduled with the sheriff or a court-appointed sale officer. Delays may be encountered due to high volumes of foreclosures or to limits set by the sheriff as to the number of sales to be conducted on any particular day.
Publication of the Notice of Sale must run in the real estate section and legal section of a newspaper of general circulation for three consecutive weeks, with the first publication being no more than 45 days prior to sale and the last publication no less than seven days prior to sale. Notice of sale must also be mailed to any parties of record.
A full-debt bid is calculated based on the judgment amount plus statutory interest from judgment through sale, post judgment advances and any additional court costs and attorney fees. The sale is conducted by the sheriff, special commissioner or sale officer, at which time the plaintiff's bid is submitted and the sale is open to outside bidding. In most cases, the plaintiff is the successful bidder. A Certificate of Sale is issued to the successful bidder. The sale may be continued for a period of less than 60 days without additional publication.
The sale is not final until confirmed by the Court. Approximately 10 to 14 days after the sale, a hearing is held on the plaintiff's motion for entry of an Order Confirming the sale. At this time, the plaintiff presents the report of sale and requests that the court confirm the sale. If all matters are in order, the sale is confirmed. In those cases in which a third party outbids the plaintiff, the sale officer issues a proceeds check to the plaintiff after confirmation.
The Court may require an evidentiary hearing regarding value of the property before it will enter a personal deficiency judgment against any party liable on the note as long as the Court has personal jurisdiction over that defendant. Also contained in the Order Confirming is an order for possession, which is effective 30 days from entry of the confirmation order. It is not necessary to file separate forcible entry and detainer proceedings to schedule an eviction unless there are occupants who were not named in the foreclosure action and more than 90 days has elapsed since the final order confirming the sale was entered.
Conveyance & Final Title
A foreclosure deed may issue immediately after the Order Confirming the sale; however, the deed is expressly subject to the 30-day appeal period from the order confirming, and if the mortgagee bids less than the full indebtedness at sale, a special 30-day right to redeem is in effect. In those cases in which a specified bid is made, the mortgagors have the right to redeem and the mortgagee must issue a deed conveying back to the mortgagors if such a redemption is made.
If the property is to be conveyed to a governmental agency or any party other than the plaintiff, an Assignment of Certificate of Sale may be executed and presented to the sheriff or other sale officer in order to obtain a deed conveying directly to the Secretary of Housing and Urban Development or Secretary of Veterans Affairs. After receiving recording approval, the deed is sent for recording and the client advised on the day the deed is actually recorded. The final title policy is ordered and forwarded to the client, HUD, VA or grantee with the original recorded deed upon receipt.
Reinstatement
Statute provides that the mortgagor or owner has the right to reinstate the mortgage by payment of all delinquent sums, including attorney fees and court costs within 90 days after the date the Court obtains jurisdiction over the mortgagor. A judgment may be entered prior to the expiration of this 90-day period; however, the judgment is expressly subject to the right of the mortgagor to reinstate. As a practical matter, the majority of servicers allow the mortgagors to reinstate at any time prior to the sale. If the order of dismissal specifically provides, the mortgagor's right to reinstate may be limited to once every five years.