If you default on your home loan payments in Utah, 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. Utah 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 home in Utah, 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. 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 deeds of trust in Utah 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 foreclosures in Utah are nonjudicial.
Before the lender or servicer can officially start the foreclosure, it has to mail you (the borrower) a notice of intent to file a notice of default. This preforeclosure notice must include, among other things, information about:
Utah law also provides borrowers with specific rights during the loss mitigation process, like the right to a single point of contact while seeking an alternative to foreclosure. Before the expiration of the three-month period described below, you may apply directly with the single point of contact for any available foreclosure relief. (Utah Code Ann. § 57-1-24.3).
To officially start the foreclosure, the trustee records a notice of default in the county recorder's office at least three months before giving a notice of sale. (Utah Code Ann. § 57-1-24). The trustee mails a copy of the notice of default within ten days after recording it to anyone who requested a copy. (Utah Code Ann. § 57-1-26(2)(a)). Most deeds of trust in Utah include a request for notice, so borrowers typically get this notification.
The trustee mails a copy of the notice of sale to you at least 20 days before the sale if the deed of trust includes a request for notice. (Utah Code Ann. § 57-1-26(2)(b)). Again, most Utah deeds of trust have a request for notice provision. Check your loan documents for details.
The lender or trustee also:
The sale is an auction, open to all bidders. The lender usually bids 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. Utah law gives you three months after the trustee records the notice of default to reinstate. (Utah Code Ann. § 57-1-31).
Also, the deed of trust might give you more time to complete a reinstatement. Check the paperwork you signed when you took out the loan to find out if you get more time to bring the loan current and, if so, the deadline to reinstate. You can also call your loan servicer and ask if the lender will let you reinstate.
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 Utah, the lender can get a deficiency judgment after a nonjudicial foreclosure by filing a lawsuit within three months after the sale. (Utah Code Ann. § 57-1-32). A 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. In Utah, though, you don't get a redemption period after a nonjudicial foreclosure. (Utah Code Ann. § 57-1-28(3)).
If you don't leave the home after a Utah foreclosure sale, the new owner has to give you a notice to quit (leave) before initiating an eviction action. (Utah Code Ann. § 78B-6-802.5).
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.