If you’re behind on your mortgage payments and you live in New Mexico, you might be wondering what happens during a foreclosure in your state. New Mexico foreclosures usually go through a judicial process, which means the courts handle them.
But the bank usually can't immediately begin a New Mexico foreclosure if you fall behind on one or just a few mortgage payments. Instead, it generally must wait out a 120-day period that federal law requires. During this time, you can explore loss mitigation (foreclosure avoidance) options, like a reinstatement, loan modification, or short sale. If you haven't worked out a way to catch up on the arrears or otherwise prevent a foreclosure within the preforeclosure period, the bank can begin the process of foreclosing under state law.
In this article, you’ll learn about New Mexico foreclosure procedures and get information about your rights under federal and state law.
Under federal law, in most cases, a loan servicer must wait until you're over 120 days' delinquent before officially starting the foreclosure process. (12 C.F.R. § 1024.41). This preforeclosure period is a good time to submit an application to your servicer asking for an alternative to foreclosure. You might be able to stay in your home by working out a repayment plan or modification, for example, or give it up without going through a foreclosure in a short sale or deed in lieu of foreclosure.
Federal law also provides some other protections to homeowners facing a foreclosure.
Again, foreclosures in New Mexico are typically judicial. Several years ago the state began permitting nonjudicial foreclosures, so out-of-court foreclosures are possible—though not common.
Before the foreclosure begins, some borrowers get a notice of default that provides 30 days to cure the default and avoid a foreclosure. (N.M. Stat. Ann. §§ 58-21A-3, 58-21A-6). The terms of the mortgage or deed of trust might also require a 30-day preforeclosure notice, called a "breach letter."
The foreclosing bank officially starts a judicial foreclosure by filing a lawsuit (a complaint) in court. It gives notice of the lawsuit by serving the borrower with a summons and the complaint. The borrower gets 30 days to respond to the suit by filing an answer with the court.
If the borrower doesn’t respond to the suit—or responds, but loses the case—the court will grant judgment for the bank. After the judge issues a judgment of foreclosure, the property will be sold to satisfy the mortgage debt. After the court issues a foreclosure judgment, the sale may not occur for 30 days. (N.M. Stat. Ann. § 39-5-17).
A notice of sale must be published in a newspaper for four weeks before the sale date and posted publicly. (N.M. Stat. Ann. § 39-5-1).
In a nonjudicial foreclosure, the bank must record a notice of sale at least 90 days before the sale date in the county records. (N.M. Stat. Ann. §§ 48-10-10, 48-10-11).
Within five days of recording the notice of sale, the bank must mail a copy of the notice to the borrower, and within 30 days to certain other parties, including those who request notice. (N.M. Stat. Ann. § 48-10-12). It must also publish the notice in a newspaper. (N.M. Stat. Ann. § 48-10-11).
Keep in mind that banks rarely use New Mexico’s nonjudicial process.
"Reinstating" is when you catch up on the missed payments, plus fees and costs, to stop a foreclosure. In New Mexico, as noted earlier, the borrower usually gets 30 days to reinstate before the foreclosure starts.
Once the foreclosure has started, the borrower may ordinarily cure the default at any time before the sale. The cure will reinstate the borrower to the same position as if the default had never occurred. (N.M. Stat. Ann. § 58-21A-6).
Some states allow the borrower to redeem the home within a specific period after a foreclosure.
For both judicial and nonjudicial foreclosures, New Mexico law generally gives a borrower nine months to redeem the home after a foreclosure sale. But the terms of the mortgage or deed of trust can—and usually do—reduce the redemption period to one month. (N.M. Stat. Ann. §§ 39-5-18, 39-5-19, 48-10-16).
At the foreclosure sale, the bank will usually make a credit bid. With a credit bid, the bank bids the debt that the borrower owes. (Basically, the bank gets a credit in this amount.) The bank can bid the full amount of the debt, including foreclosure fees and costs, or it might bid less. If the bank is the highest bidder at the sale, but bids less than the total debt, the bank might be able to seek a deficiency judgment against the borrower. Whether the bank can get a deficiency judgment depends on state law.
Other parties who bid on a property at a foreclosure sale must bid cash or a cash equivalent, like a cashier's check. If a third party is the high bidder at the sale, the proceeds from the sale are used to repay the borrowers' debt. If the proceeds aren't sufficient to pay off the full amount of the debt, the bank can, if state law allows it, get a deficiency judgment.
In New Mexico, the bank may obtain a deficiency judgment in a judicial foreclosure.
A deficiency judgment is allowed after a nonjudicial foreclosure if the bank files a separate lawsuit within six years of the foreclosure sale. Deficiency judgments are, however, prohibited for loans made to low-income households, whose annual income is at or below 80% of the area median income. (N.M. Stat. Ann. § 48-10-17).
In most cases, the foreclosing bank is the high bidder at the foreclosure sale and becomes the new owner of the property. The bank can get a writ of assistance to evict the former owner as part of the foreclosure action (judicial foreclosures) or can file a separate lawsuit to evict (nonjudicial foreclosures).
If you want to learn more about the foreclosure process in New Mexico or want to find out if you have any potential defenses to a foreclosure, consider talking to a lawyer.
It’s also a good idea to make an appointment to speak to a HUD-approved housing counselor, especially if you want to learn about different loss mitigation options.