If you’re facing a foreclosure in Montana, the process could potentially be judicial, which means it goes through the court system; but it’s more likely to be nonjudicial, which means the process happens without court supervision. Most foreclosing banks choose the nonjudicial route because it’s faster and less expensive.
Because most foreclosures in the state take place out of court, this article focuses on that process.
Federal law also provides various other protections to homeowners facing a foreclosure.
Most home loan contracts in Montana are trust indentures (a deed of trust) under the state’s Small Tract Financing Act (STFA), which is for properties that don't exceed 40 acres. This Act provides you with certain rights, including the right to reinstate the loan before the sale, as well as prohibits the lender from getting a deficiency judgment after the foreclosure.
In a nonjudicial foreclosure under the STFA, the trustee (the third party that manages the foreclosure process) must record a notice of sale and mail a copy to the borrower at least 120 days before the sale. (Mont. Code Ann. § 71-1-313).
The trustee must also:
If the mortgage isn't covered by the STFA, the trustee must personally serve notice to the borrower 30 days prior to the sale and publish it in a newspaper or, if there is no newspaper in the county, post it on the property. (Mont. Code Ann. § 71-1-224).
"Reinstating" is when the borrower catches up on the defaulted loan's missed payments (principal and interest), plus fees and costs, to stop a foreclosure. Under the STFA, the borrower can reinstate at any time prior to sale. (Mont. Code Ann. § 71-1-312).
In some states, the borrower can redeem the home within a specific amount of time after the foreclosure. In Montana, if the foreclosure is nonjudicial under the STFA, you don't get a right of redemption. (Mont. Code Ann. § 71-1-318). If the sale is not under the STFA, the borrower gets one year to redeem the home following the sale. (Mont. Code Ann. § 25-13-802).
When the total mortgage debt exceeds the foreclosure sale price, the difference is called a deficiency. Some states allow the foreclosing lender to seek a personal judgment, which is called a "deficiency judgment," against the borrower for this amount. Other states prohibit deficiency judgments with what are called anti-deficiency laws.
In Montana, a deficiency judgment isn't allowed after a nonjudicial foreclosure of a trust indenture. (Mont. Code Ann. § 71-1-317). A deficiency judgment is also not permitted in a judicial foreclosure of a trust indenture for an occupied, single-family residence. (See First State Bank of Forsyth v. Chunkapura, 226 Mont. 54, 734 P.2d 1203 (1987), Midfirst Bank v. Ranieri, 848 P.2d 1046 (1993)).
Under the STFA, the purchaser at the foreclosure sale is entitled to possession of the home on the 10th day following the sale. If the foreclosed homeowner doesn't leave, the purchaser may start lawsuit to evict the former homeowners. (Mont. Code Ann. § 71-1-319).
If you want to get more information about foreclosure procedures in Montana or would like to find out about potential defenses in your particular situation, consider talking to a lawyer. Also, consider making an appointment to speak to a HUD-approved housing counselor if you want to learn about different foreclosure avoidance options.