If you default on your mortgage payments in New Mexico, the servicer (on behalf of the loan owner, called the "lender" in this article) will eventually begin a foreclosure. In most cases, the lender will file a lawsuit in court to foreclose. Although rare, nonjudicial foreclosures are also allowed under certain circumstances.
State law specifies how foreclosures work, and both federal and state laws give you rights and protections throughout the process.
When you get a loan to buy residential real estate in New Mexico, 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. In most cases, 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. (12 C.F.R. § 1024.39).
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 New Mexico 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.
Also, before a New Mexico 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).
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 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 you don't respond to the suit, the lender can get a default judgment from the court. The judgment will give the lender permission to hold a foreclosure sale. But if you respond to the lawsuit by filing an answer, 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 order the home sold at a foreclosure sale.
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).
At the 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. Sometimes the lender bids the full amount of the debt, sometimes it bids less. The highest bidder at the sale becomes the new owner of the property.
"Reinstating" is when the borrower brings the loan current by paying the missed payments of principal and interest, plus fees and costs. Completing a reinstatement will stop the foreclosure.
At any time before the time title is transferred by means of foreclosure, by judicial proceeding and sale or otherwise, you may cure the default, and reinstate the home loan. The cure will reinstate you to the same position as if the default had never occurred. (N.M. Stat. Ann. § 58-21A-6).
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 New Mexico, the bank may obtain a deficiency judgment in a judicial foreclosure.
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. For both judicial and nonjudicial foreclosures, New Mexico law generally gives the 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).
In most cases, the lender is the high bidder at the foreclosure sale and becomes the new owner of the property. The lender 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).
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.