If you default on your mortgage payments in Oklahoma, the servicer (on behalf of the loan owner, called the "lender" in this article) will eventually begin a foreclosure. State law specifies how foreclosures work; usually, the lender files a lawsuit in court, but nonjudicial foreclosures are also allowed. If the lender decides to go ahead with a nonjudicial foreclosure, you can force it to go through the courts instead. No matter if the process is judicial or nonjudicial, both federal and state laws give you rights and protections throughout the process.
If you get a loan to buy residential real estate in Oklahoma, 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 the mortgage contains a power of sale clause, the lender can foreclose without going to court.
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. 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 Oklahoma 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).
In Oklahoma, the lender typically files a lawsuit in court to foreclose. This process is called a “judicial” foreclosure. You'll get a summons and complaint notifying you of the suit. 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. 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. The lender must mail a notice of sale to you (the borrower) at least ten days before the sale date, and publish the notice of sale for two consecutive weeks in a newspaper. (Okla. Stat. tit. 12, § 764).
Again, foreclosures in Oklahoma are typically judicial. But the lender could opt to foreclose outside of the court system (nonjudicially) instead. Before starting a nonjudicial foreclosure, the lender has to mail a notice of intention to foreclose to you. The notice must give you 35 days from the date the notice is sent to cure the default by paying past-due amounts. But the lender doesn't have to send this notice if you've defaulted on the mortgage more than four times if the property is a homestead, otherwise three times, and it previously sent such notices. (Okla. Stat. tit. 46, § 44).
If you don’t cure the default, the lender must personally serve a notice of sale on you at least 30 days before the sale date. The notice must also be published in a newspaper at least once a week for four consecutive weeks and recorded in the county clerk’s office. (Okla. Stat. tit. 46, § 45).
If the lender chooses to use a nonjudicial process, you can compel the lender to foreclose judicially. You must take the following steps at least ten days before the date of the foreclosure sale:
If you want to convert a nonjudicial foreclosure to a judicial one, talk to a lawyer to make sure you complete all required steps and documentation requirements.
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 property’s new owner.
“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.
Oklahoma law doesn’t give a borrower the right to reinstate in a judicial foreclosure. But most mortgages allow the borrower to bring the loan current by a particular deadline. Check your mortgage for details. And, if you don't otherwise have a right to reinstate, your lender might allow you to do so anyway.
In a nonjudicial foreclosure, the borrower has the right to cure any default and reinstate the mortgage for 35 days from the date the notice of intention to foreclose is sent, as discussed above. But not more than four times in 24 months if the property is a homestead, otherwise three times. (Okla. Stat. tit. 46, § 44).
Also, many mortgages have a provision that permits the borrower to reinstate for a limited amount of time.
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 a judicial foreclosure, the lender can request a deficiency judgment when it makes a motion for an order confirming the foreclosure sale or within 90 days after the foreclosure sale. (Okla. Stat. tit. 12, § 686).
With a nonjudicial foreclosure, the lender generally can get a deficiency judgment by filing a lawsuit for the deficiency within 90 days after the foreclosure sale. But the lender can’t get a deficiency judgment if, at least ten days before the foreclosure sale, you send written notice to the lender by certified mail saying that:
With both types of foreclosure, the court can limit the amount of the deficiency judgment to the lesser of:
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property.
In Oklahoma, the court must confirm (approve) the sale after it takes place as part of the judicial foreclosure process. You can redeem the home up until the court confirms the sale. (Okla. Stat. tit. 42 §§ 18 to 20).
In a nonjudicial foreclosure, you get the right to redeem the property up to the completion of the sale. (Okla. Stat. tit. 46, §§ 43, 45, 47). (To get details on redemption rights in Oklahoma, see Nolo’s article If I lose my home to foreclosure in Oklahoma, can I get it back?)
If you (the foreclosed homeowner) don’t leave the home after a judicial foreclosure, the court may (in the order confirming the sale) order the clerk of the court to issue a writ of assistance to the sheriff to place the purchaser in possession of the home. In a nonjudicial foreclosure, the purchaser may seek a writ of assistance by application to a court. (Okla. Stat. tit. 12, § 686, Okla. Stat. tit. 46, § 43).
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.