If you default on your mortgage payments in North Dakota, the servicer (on behalf of the loan owner, called the "lender" in this article) will eventually begin a foreclosure. North Dakota law specifies how foreclosures work, and both federal and state laws give you rights and protections throughout the process.
If you get a loan to buy residential real estate in North Dakota, 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. If you fail to make the payments, the mortgage provides the lender with the right to sell the home at a foreclosure sale to recoup the money it loaned you.
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 North Dakota mortgages 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. 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).
The lender has to serve you (the homeowner), typically by mail, a notice at least 30 days and not more than 90 days before filing a foreclosure lawsuit. (N.D. Cent. Code § 32-19-20). The notice gives you 30 days to pay the past-due amounts and avoid a foreclosure. (N.D. Cent. Code § 32-19-21).
Approximately half of the states, including North Dakota, require the lender to file a lawsuit to foreclose. This process is called a "judicial" foreclosure. The lender gives notice of the suit by serving you a summons and complaint. (N.D. Cent. Code § 32-19-29).
If you fail to answer the court action, the lender can get a default judgment from the court. The judgment will give the lender permission to hold a foreclosure sale. If you respond to the lawsuit, however, the case will go through the litigation process. The lender might then request the court to grant summary judgment. A summary judgment motion asks that the court grant judgment in favor of the lender because the case's critical aspects aren't in dispute. If the court grants summary judgment for the lender—or you lose at trial—the judge will enter a judgment of foreclosure and order the home sold.
The officer making the sale must publish a notice of sale in a newspaper once a week for three successive weeks, and, in some instances, mail copies to interested parties. (N.D. Cent. Code §§ 28-23-04, 32-19-08).
The process ends with a foreclosure sale. The lender usually makes a bid on the property using 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 you catch up on the missed payments, plus fees and costs, to stop a foreclosure. Under North Dakota law, you can cure the default and reinstate the mortgage within 30 days after service of the preforeclosure notice. (N.D. Cent. Code § 32-19-28).
Also, the terms of the mortgage contract you signed when you took out the loan might give you the right to reinstate the loan for a longer amount of time. Or the lender might agree to let you complete a reinstatement even if the time frame in the preforeclosure notice has expired.
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.
North Dakota law prohibits deficiency judgments in foreclosures of residential properties of four or fewer units, one of which the owner occupies as a homestead, on up to 40 contiguous acres. (N.D. Cent. Code § 32-19-03). The foreclosure complaint must state whether the lender will be seeking a deficiency judgment. (N.D. Cent. Code § 32-19-04).
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. In North Dakota, the borrower can generally redeem the home within 60 days after the sale, but not if the property is abandoned. (N.D. Cent. Code § 32-19-18). If the property is agricultural, the redemption period is one year after the lender files the foreclosure complaint or at the time of first publication of the foreclosure notice but no earlier than 60 days after the sale. (N.D. Cent. Code § 32-19-18).
The foreclosed homeowner can stay in the home during the redemption period. In the foreclosure judgment, the court can order the homeowner to turn possession over to the purchaser once the redemption period expires. (N.D. Cent. Code § 32-19-06). If the court determines the real property is abandoned, though, the court may eliminate the redemption period. (N.D. Cent. Code § 32-19-19).
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 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.