If you get a loan to buy a home in Alaska, you'll likely sign two documents: a promissory note and a deed of trust. The promissory note is the document that contains your promise to repay the loan along with the repayment terms. The deed of trust, which is very similar to a mortgage, is the document that gives the lender a security interest in the property and will probably include a power of sale clause. If you fail to make the payments, the power of sale clause gives the lender the right to sell the home nonjudicially to recoup the money it loaned you.
The servicer (on behalf of the loan owner, called the “lender” in this article) will manage the foreclosure. The method will most likely be nonjudicial, although judicial foreclosures are also allowed. Alaska law specifies how nonjudicial procedures work, and both federal and state laws give you rights and protections throughout the process.
If you miss a payment, the servicer can usually charge a late fee after the grace period expires. Most mortgage loans give a grace period of ten to fifteen days, for example, before you’ll incur late charges. To find out the grace period in your situation and the amount of the late fee, review the promissory note or your monthly billing statement.
If you miss a few mortgage payments, the servicer will probably send letters and call you to try to collect. Federal mortgage servicing laws require the servicer to contact you (or attempt to contact you) by phone to discuss foreclosure alternatives—called “loss mitigation” options—no later than 36 days after a missed payment and again within 36 days after each following missed payment. No more than 45 days after a missed payment, the servicer must let you know in writing about loss mitigation options that could be available and assign personnel to help you. Some exceptions to a few of these requirements exist, like if you file for bankruptcy or tell the servicer not to contact you under the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.39).
Many deeds of trust in Alaska have a provision that requires the lender to send a breach letter if you fall behind in payments. This notice tells you that the loan is in default. If you don’t cure the default, the lender can accelerate the loan (call it due) and go ahead with the foreclosure.
Federal law generally requires the servicer to wait until the loan is over 120 days delinquent before officially starting a foreclosure. However, in a few situations, like if you violate a due-on-sale clause or if the servicer is joining the foreclosure action of a superior or subordinate lienholder, the foreclosure can begin sooner. (12 C.F.R. § 1024.41).
Again, most Alaska foreclosures are nonjudicial.
To start a nonjudicial foreclosure in Alaska, the trustee records a notice of default in the appropriate recording district not less than 30 days after default and not less than 90 days before the sale. Then, the trustee:
Also, the trustee must:
The sale is an auction, open to all bidders. The lender usually makes a bid on the property using what’s called a "credit bid" rather than bidding cash. With a credit bid, the lender gets a credit up to the amount of the borrower’s debt. The highest bidder at the sale becomes the new owner of the property.
“Reinstating” is when a borrower pays the overdue amount, plus fees and costs, to bring the loan current and stop a foreclosure. Under Alaska law, you can reinstate the loan at any time before the sale date. But if the trustee filed two or more prior notices of default and you reinstated each time, the trustee can refuse to accept a subsequent reinstatement. (Alaska Stat. § 34.20.070).
Sometimes, a foreclosure sale doesn’t bring in enough money to pay off the full amount owed on the loan. The difference between the sale price and the total debt is called a “deficiency balance.” Many states allow the lender to get a personal judgment, called a “deficiency judgment,” for this amount against the borrower. In Alaska, though, deficiency judgments aren’t allowed after nonjudicial foreclosures. (Alaska Stat. § 34.20.100).
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. In Alaska, you can't redeem after a nonjudicial foreclosure unless the deed of trust that you signed when you took out the loan specifically provides a right of redemption. (Alaska Stat. § 34.20.090).
After the sale, the purchaser must give you a notice to quit (vacate) before starting eviction proceedings. (Alaska Stat. § 09.45.630).
Foreclosure laws are complicated. Servicers and lenders sometimes make errors or forget steps. If you think your servicer or lender failed to complete a required step, made a mistake, or violated state or federal foreclosure laws, you might have a defense that could force a restart to the foreclosure. Or, you might have leverage to work out an alternative.
Consider talking to a local foreclosure attorney or legal aid office immediately to learn about your rights. A lawyer can also tell you about different ways to avoid foreclosure. Likewise, a HUD-approved housing counselor can provide helpful information (at no cost) about various alternatives to foreclosure.