If you get a loan to buy a home in West Virginia, 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. If you fail to make the payments, the lender can sell the home through a process called "foreclosure" to recoup the money it loaned you.
The servicer (on behalf of the loan owner, called the “lender” in this article) will manage the foreclosure. In West Virginia, the method will most likely be nonjudicial, although judicial foreclosures are also allowed. West Virginia law specifies how nonjudicial procedures work, and both federal and state laws give you rights and protections throughout the foreclosure.
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 West Virginia 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).
Again, most foreclosures in West Virginia are nonjudicial.
Under West Virginia law, the lender has to personally deliver or mail a notice of default, which may be sent after you (the borrower) have been in default for five days, to your last known address. This notice gives you ten days to cure the default. But you’ll lose the right to cure after three defaults. (W. Va. Code § 46A-2-106).
The trustee has to send you a notice of sale by certified mail a reasonable amount of time before the sale takes place. (W. Va. Code § 38-1-4, Joy v. Chessie Employees Fed. Credit Union, 411 S.E.2d 261 (W.Va. 1991)). To learn what time frame is considered reasonable, you’ll want to confer with a foreclosure lawyer. In the Joy case, the court decided that 18 days was reasonable. Under West Virginia law, the notice is complete when the trustee mails the notice of sale, regardless of whether the mail is returned as refused or is undeliverable. (W.Va. Code § 38-1-4).
The trustee also has to publish a copy of the notice of sale in a newspaper, generally once a week for two weeks. (W. Va. Code § 38-1-4, § 59-3-2). Then, the property is sold at a foreclosure sale.
The sale is an auction, open to all bidders. The lender 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. As discussed above, in West Virginia, the notice of default must give you ten days to cure the default and reinstate the loan. Again, you’ll lose the right to reinstate after three defaults. (W. Va. Code § 46A-2-106).
Your loan contract might also provide you with a right to reinstate. To find out if you get this right and the deadline to complete a reinstatement, read the deed of trust you signed when you took out the loan. 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 West Virginia, the lender can get a deficiency judgment by filing a lawsuit after the nonjudicial foreclosure.
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. West Virginia law, however, doesn’t provide a redemption period for foreclosed homeowners after a foreclosure sale.
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.