In Pennsylvania, the foreclosure process typically follows a judicial procedure, meaning it involves the court system. The process can take several months or even years, depending on the circumstances. Here’s an overview of the steps involved:
1. Missed Payments and Default
- Default: The foreclosure process begins when a borrower fails to make their mortgage payments. Generally, a lender will wait for the borrower to miss three payments (about 90 days of delinquency) before starting foreclosure proceedings.
- Notice of Default: Before filing for foreclosure, the lender will usually send a “notice of default” or “demand letter,” notifying the borrower of their missed payments and urging them to make the payments or work out an alternative solution.
2. Filing a Complaint
- If the borrower does not bring the loan current, the lender files a complaint in court to initiate the foreclosure process. This complaint is typically filed in the county court where the property is located.
- The complaint outlines the borrower’s default, the amount owed, and the lender’s request to foreclose on the property.
3. Service of the Complaint
- The borrower must be served with a copy of the foreclosure complaint and a notice of intention to foreclose. The lender’s attorney usually arranges for the service, and it can be done by a sheriff or a private process server.
- The borrower has 20 days from the date of service to respond to the complaint.
4. Answering the Complaint
- The borrower has the opportunity to respond by filing an answer with the court. In this response, the borrower may dispute the foreclosure, request a payment plan, or raise any defenses they may have.
- If the borrower does not respond within the 20-day period, the lender can request a default judgment from the court.
5. Judgment and Sale
- If the borrower does not resolve the issue (either by responding to the complaint or by entering into a repayment plan), the court will schedule a hearing to decide whether to grant a judgment of foreclosure.
- If the court rules in favor of the lender, a judgment of foreclosure is issued, and the lender is authorized to sell the property at a sheriff’s sale.
6. Sheriff’s Sale
- Once the judgment is entered, the property is scheduled for a sheriff’s sale. The sheriff’s sale is a public auction where the property is sold to the highest bidder.
- The sale is typically advertised in local newspapers for several weeks before the auction. The borrower will receive notice of the sale date.
- The sale proceeds are applied to the outstanding loan balance. If the sale doesn’t cover the full balance, the lender may seek a deficiency judgment to recover the remaining amount.
7. Redemption Period
- After the sheriff’s sale, Pennsylvania has a post-sale redemption period, which typically lasts for nine months. This gives the borrower a final chance to redeem the property by paying the full amount owed (the loan balance, fees, and costs).
- If the borrower is able to redeem the property during this period, they can keep it. However, if they do not redeem the property, the purchaser (often the lender or another buyer) can take full possession.
8. Eviction
- If the borrower does not redeem the property or make a settlement after the sale, the new owner can initiate an eviction process to remove the borrower from the property. This typically involves filing a petition for eviction with the court, and the borrower may be given a few additional weeks to vacate the property.
Alternatives to Foreclosure
- Loan Modification: Borrowers who are struggling with their mortgage payments may be able to negotiate a loan modification with their lender, which may result in lower monthly payments, a lower interest rate, or an extension of the loan term.
- Short Sale: In a short sale, the borrower sells the property for less than the mortgage balance, and the lender agrees to accept the proceeds as full satisfaction of the loan.
- Deed in Lieu of Foreclosure: This is when the borrower voluntarily transfers the property to the lender in exchange for the lender canceling the debt.
Important Considerations
- Attorney Involvement: Because Pennsylvania is a judicial foreclosure state, the process involves significant court involvement, which often means the lender will hire an attorney to represent them. Similarly, borrowers may also want legal representation.
- Foreclosure Timeline: The entire foreclosure process can take anywhere from 6 months to over a year, depending on the court’s schedule, the complexity of the case, and any attempts to negotiate a settlement.
The foreclosure process can be complicated, and if you’re facing foreclosure, it is important to seek professional advice, either from an attorney or a housing counselor, to understand your options and rights.