On Thursday, April 30, NPLS will be hosting “Foreclosure Basics Without the Headache” from 2:00 PM- 3:00 PM. This Distance Learning CLE is aimed at educating non-foreclosure practicing attorneys on the foreclosure process. You can register for the Zoom through this link.
If a borrower falls behind on mortgage payments, the lender may start the foreclosure process. The lender must provide the borrower with the proper pre-foreclosure notice. There are two different Pennsylvania laws that require very specific pre-foreclosure notices (Act 6 and Act 91), depending on the type of mortgage the borrower has.
An Act 6 notice is generally given to borrowers who get loans from the Federal Housing Administration or U.S. Department of Agriculture and likely rent their properties to tenants. Act 91 notices apply to those who have conventional loans with banks.
33 days after the mailing of the notice, the lender can file a “Complaint in Mortgage Foreclosure” with the Court of Common Pleas, which the Sheriff will deliver to the borrower’s residence. The borrower will then have 20 days after the service of the complaint to respond to the foreclosure in court. If they do not respond within the 20 days, the mortgage company must send a “10-day warning” letter that says unless the borrower responds within 10 days, it will file a final judgment with the court.
If the borrower is foreclosed on, their home will be sold at a Sheriff’s sale. The Sheriff will then transfer the deed to the new purchaser between 20 and 40 days. The purchaser can then file an ejectment action with the Court of Common Pleas if the previous resident does not leave voluntarily.
Still, there are certain actions that a borrower can take to potentially avoid foreclosure. Seeking a legal professional to help defend against the denial of assistance or the foreclosure lawsuit should be one of the first steps taken after the foreclosure notice is delivered.
Additionally, Pennsylvania has a loan program called the Homeowner’s Emergency Mortgage Assistance Program (HEMAP) that can provide emergency assistance. Borrowers have limited time to get their application to the Pennsylvania Housing Finance Agency (PHFA), which the housing counselors can assist with. PHFA then has 60 days to review the application and, during that time, the lender cannot file foreclosure.
Another option includes refinancing the mortgage, which means swapping it for a new one with a new interest rate or term. This could come with lower monthly payments. A different option that would reduce monthly payments is a modification. For a modification, the borrower needs to be behind on payments, show they are about to miss a payment, or prove they are experiencing economic hardship. A modification may lower the interest rate, increase the term, or change the loan type.
Finally, during the eviction process, a borrower might have the opportunity to enter a mortgage foreclosure diversion program. A mortgage foreclosure diversion program allows borrowers who are facing a potential foreclosure to delay a court proceeding. In the meantime, both the borrower and lender will attend a conciliation conference which gives the parties a space to work out an agreement, different payment structure, or term of the mortgage.
The conciliation conference will be overseen by a court-appointed attorney. After the conference, one of three things can happen: the foreclosure action will continue and the borrower will be removed from the diversion program, the foreclosure proceeding will be stayed to give the parties more time to reach an agreement, or a settlement can be reached and the foreclosure proceedings will end.
