If you default on your home loan payments in Nebraska, 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. Nebraska 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 a Nebraska home, you'll likely sign two documents: a promissory note and a deed of trust. The promissory note is the document that contains your promise to repay the loan along with the repayment terms. The deed of trust, which is very similar to a mortgage, 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 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 deeds of trust in Nebraska 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. However, 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 Nebraska foreclosures are nonjudicial.
To start a nonjudicial foreclosure, the trustee records a notice of default in the recorder's office in the county where the property is located. The notice gives you one month to cure the default. You'll get two months if the property is used in farming operations, and is not located in any incorporated city or village. (Neb. Rev. Stat. § 76-1006).
The trustee also mails a copy of the notice of default within ten days after recording it to anyone who previously filed a request for notice in the county records. (Neb. Rev. Stat. § 76-1008).
After at least one month, the trustee publishes a notice of sale in a newspaper for five successive weeks, with the last publication at least ten days but not more than 30 days before the sale. (Neb. Rev. Stat. § 76-1007). The trustee must send a copy of the notice of sale at least 20 days before the foreclosure sale date to anyone who previously filed a request for notice in the county records. (Neb. Rev. Stat. § 76-1008).
The sale is a public sale, open to all bidders. 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 a borrower pays the overdue amount, plus fees and costs, to bring the loan current and stop a foreclosure.
Again, under Nebraska law, you get one month (two, if the property is agricultural) to reinstate the loan after the trustee records the notice of default. (Neb. Rev. Stat. § 76-1006). Also, many Nebraska deeds of trust permit the borrower to reinstate the loan up to five days before the sale, or your lender might allow you to pay the money you owe to bring your account current.
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.
In Nebraska, the foreclosing party may obtain a deficiency judgment by filing a lawsuit within three months after the foreclosure sale. The amount of the deficiency judgment is limited to the lesser of:
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. Under Nebraska law, though, foreclosed homeowners don't get a right of redemption after a nonjudicial foreclosure. (Neb. Rev. Stat. § 76-1010).
If the foreclosed homeowner doesn't leave the property after a Nebraska foreclosure sale, the new owner must go to court and get an eviction order.
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 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.