If you default on your mortgage payments in Pennsylvania, the servicer (on behalf of the loan owner, called the "lender" in this article) will eventually begin a foreclosure. Approximately half of the states, including Pennsylvania, require the lender to file a lawsuit in court to foreclose. State 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 Pennsylvania, 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. 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 Pennsylvania 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 Pennsylvania, the lender has to send you (the borrower) a notice of intent to foreclose at least 30 days before starting a foreclosure. The notice must give you the chance to catch up on the payments, called “curing the default.” The Pennsylvania Supreme Court ruled in the case of JPMorgan Chase Bank N.A. v. Taggart, 203 A.3d 187 (Pa. Sup. Ct., Feb. 20, 2019) that the lender has to issue a new notice of intent to foreclose before filing a second foreclosure complaint in cases where the initial complaint was dismissed or withdrawn. But this notice isn’t required under certain circumstances, like if you abandon the home. (41 Pa. Stat. Ann. § 403).
Also, in most cases, the lender must send a notice explaining homeowner rights and describing what help is available, including the right to apply to the Pennsylvania Housing Finance Agency under the Homeowners' Emergency Mortgage Assistance Program (HEMAP) for assistance. (35 Pa. Stat. Ann. § 1680.403c). The notice must also advise you of the default, include an itemized breakdown of the total amount past due, and give 30 days (plus three days to account for mailing time) to have a face-to-face meeting with a local consumer credit counseling agency to try to resolve the default. If you meet with an approved credit counseling agency, the lender can’t take any legal action—like starting a foreclosure—for 30 days after the meeting. (35 Pa. Stat. Ann. § 1680.403c).
Again, in Pennsylvania, the lender files a lawsuit in court to foreclose. The lender gives notice of the suit by serving you a summons and complaint.
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. A notice of sale must be posted on the property and at the sheriff's office, and served to you at least 30 days before the sale. It must also be published in a newspaper once a week for three weeks. (Pennsylvania Rule of Civil Procedure 3129.2).
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.
Pennsylvania law allows reinstatement at any time at least one hour prior to when bidding starts at the foreclosure sale, a maximum of three times in any calendar year. (41 Pa. Stat. Ann. § 404).
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. In Pennsylvania, though, you don't get a redemption period after a foreclosure.
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, including Pennsylvania, allow the lender to get a personal judgment, called a "deficiency judgment," for this amount against the borrower.
In Pennsylvania, the lender can get a deficiency judgment by filing a separate lawsuit within six months after the foreclosure sale. If the lender was the purchaser at the foreclosure sale, the deficiency is limited by the property’s fair market value. (42 Pa. Cons. Stat. Ann. §§ 8103(a), 5522(b)(2)).
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.