If you default on your mortgage payments in Missouri, the servicer (on behalf of the loan owner, called the “lender” in this article) will eventually begin the foreclosure process. The method will most likely be nonjudicial, although judicial foreclosures are also allowed. Missouri law specifies how nonjudicial procedures work, and both federal and state laws give you rights and protections throughout the foreclosure.
If you get a loan to buy residential real estate in Missouri, you'll likely sign two documents: a promissory note and a deed of trust, which is like a mortgage. The promissory note is the document that contains your promise to repay the loan along with the repayment terms. The deed of trust 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 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. To find out the grace period in your situation and the amount of the monthly late fee, review the promissory note or your monthly billing statement.
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. 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 Missouri 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, most foreclosures in Missouri are nonjudicial.
The foreclosing lender or trustee (the third party that handles nonjudicial foreclosures in Missouri) must mail a foreclosure sale notice to you no less than 20 days before the foreclosure sale. (Mo. Rev. Stat. § 443.325).
The lender or trustee must also publish an advertisement of the foreclosure sale in a newspaper either:
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, like Missouri, allow the lender to get a personal judgment, a “deficiency judgment,” for this amount against the borrower.
To get a deficiency judgment, the lender has to sue you after the nonjudicial foreclosure. (Mo. Rev. Stat. § 443.240). Once the lender gets a deficiency judgment, it might try to collect on it by, for example, going after your paycheck through a 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 Missouri, if the lender purchases the home at the foreclosure sale, the redemption period lasts for one year. If someone else buys the property at the sale, however, you don’t get a right of redemption. To redeem property in Missouri, you have to give written notice of your intent to redeem at the sale or within ten days before the sale and satisfy a bond requirement. (Mo. Rev. Stat. § 443.410, § 443.420).
In Missouri, if you (the foreclosed homeowner) don’t leave the home after a nonjudicial foreclosure, the lender may file an unlawful detainer (eviction) lawsuit against you. (Mo. Rev. Stat. § 534.030).
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.