If you default on your mortgage payments in Louisiana, the servicer (on behalf of the loan owner, called the "lender" in this article) will eventually begin the foreclosure process. The process will most likely be an "executory proceeding." This type of proceeding allows a lender to seize and sell a home without going through the steps that are typically part of a judicial foreclosure.
Ordinary judicial foreclosures are also possible in Louisiana, but not as common. Because the most prevalent type of foreclosure process in the state is an executory proceeding, this article focuses on that process.
When you get a loan to buy residential real estate in Louisiana, you'll likely sign two documents: a promissory note and a mortgage. The promissory note is the document that contains your promise to repay the loan along with the repayment terms. The mortgage is the document that gives the lender a security interest in the property and will probably include a confession of judgment (see below).
If you fail to make the payments, the confession of judgment gives the lender the right to seize and sell the home so it can recoup the money it loaned you.
If you miss a payment, the servicer can 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. Review the promissory note or your monthly billing statement to find out the grace period in your situation and the amount of the monthly late fee.
If you skip a few mortgage payments, the servicer will probably send letters and call you to try to collect the late amounts. 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. (12 C.F.R. § 1024.39).
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 mortgages in Louisiana have a provision that requires the lender to send a breach letter if the borrower falls behind in payments.
This notice tells you that the loan is in default. If you don't cure the default, say by getting caught up on the missed payments, 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.
But 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, the most common foreclosure process in Louisiana is an executory proceeding. This type of foreclosure is possible when the borrower agrees in the loan paperwork that the lender may get a judgment upon a default. This type of clause in a mortgage is called a "confession of judgment."
So, upon a default, the lender files a foreclosure petition in court, with the mortgage attached, and the court orders the property seized and sold. You can fight the foreclosure only by appealing or bringing a lawsuit. (La. Code Civ. Proc. Ann. art. 2634, 2638).
The two notices in a Louisiana executory proceeding are a notice of seizure and a notice of sale.
Notice of seizure. Immediately after the court issues a writ of seizure and sale, the sheriff may seize the property. The sheriff must serve you a written notice of seizure by personal service or domiciliary service. (La. Code Civ. Proc. Ann. art. 2721). (Domiciliary service is when the server leaves the documents at your home with a person of suitable age and discretion who resides in the property.)
The notice of seizure must include information about your options for avoiding foreclosure, including the availability of free housing counseling, and the time, date, and place of the sheriff's sale. The initial sheriff's sale date can't be scheduled any earlier than 60 days from the date the court signed the order allowing the foreclosure. (La. Rev. Stat. § 13:3852, La. Code Civ. Proc. Ann. art. 2293(B)(1)).
Notice of sale. At least three days, not including holidays, after the sheriff serves the notice of seizure to you, the sheriff must publish a notice of sale at least twice. (La. Code Civ. Proc. Ann. art. 2331, 2722).
The sale is a public auction.
Sometimes, when a home sells at a foreclosure sale, the sale doesn't bring in enough money to pay off the full amount owed. The difference between the sale price and the total debt is called a "deficiency balance." Many states, including Louisiana, allow the lender to get a personal judgment (a "deficiency judgment") for this amount against the borrower.
In Louisiana, the lender can get a deficiency judgment if the property was appraised before the sale. (La. Code Civ. Proc. Ann. art. 2771, 2723, La. Rev. Stat. § 13:4106). To get the deficiency judgment, the lender has to:
(In an ordinary foreclosure proceeding, the deficiency judgment is obtained as part of that action.)
Once the lender gets a deficiency judgment, it might try to collect on it by, for example, going after your paycheck through wage garnishment or your bank account with a levy
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. In Louisiana, though, you don't get a right of redemption after a foreclosure.
Once the sheriff's deed to the new owner is recorded after the sale, the purchaser can get a writ of possession from court. If you (the foreclosed homeowner) don't leave, the sheriff will remove you and your belongings from the home.
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 in working 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.