Even if you do not own a house now, you will likely own one in the future. While buying a home is a major triumph, even more important is making timely mortgage payments and ensuring that you are abiding by housing law. Responsible homeownership can lead to financial stability and personal success; on the other hand, irresponsible homeownership can land you in deep trouble. In short, you will want to know what you are getting yourself into when you purchase a home.
A mortgage is the most common method of financing the purchase of a home and involves a binding agreement between a borrower and a lender who is typically a financial institution such as a bank. The lender provides loans for the borrower to purchase the house and the parcel of land to which it is affixed, and in return the lender acquires interest in the land. A mortgage agreement is fulfilled once the original principal amount and incurred interest are fully paid off or the property is taken through foreclosure.
In the event that you fail to make mortgage payments, foreclosure becomes a looming threat. Foreclosure is the legal process that allows the lender to demand immediate payment for the entire mortgage debt, an option provided in an acceleration clause of the mortgage agreement. If you fail to pay the entire mortgage debt by the established deadline, the lender has the right to seize the property and sell it for any remaining mortgage debt.
The foreclosure process differs depending on state law and the terms of the mortgage. Most foreclosure cases in Utah follow a nonjudicial process, meaning that they are not done through court proceedings. Rather, they follow a process in which the trustee (possibly the lender or any organization that holds the legal title to the property) records a Notice of Default at the County Recorder’s office and is permitted to sell the property.
You have important rights as a homeowner that are protected by law and cannot be infringed upon, even by the party demanding mortgage payment.
1. One late payment does not warrant foreclosure. The first late payment results in a Notice of Delinquency but does not result in the lender foreclosing and seizing your property. During this time, the lender will give you the opportunity to make past-due payments. It is not until the third missed payment that the foreclosure process usually begins.
2. Before initiating a foreclosure proceeding, the lender must send you notice that the loan is in default. Most Utah mortgages have a provision that requires the lender to send a notice, commonly called a “Breach Letter,” informing you that the loan is in default before the lender can start the foreclosure process.
3. In pre-foreclosure process, you will not be forced to vacate your property. The pre-foreclosure stage involves the period of time when you fall behind in payments but before the official foreclosure process starts.
4. You might be entitled to excess money if the property sells over the amount owed. In the event that your property is foreclosed and sells over the amount that you owed to the lender, the district court where the sale took place will decide what to do with the excess money.
5. A qualified tenant who is not the foreclosed homeowner is entitled to a 90-day notice before they can be evicted. While the foreclosed homeowner will be forced to vacate the property following the foreclosure sale, a tenant who is not an immediate family member of the foreclosed homeowner and who meets certain requirements will be entitled to a 90-day notice before being forced to vacate the property.
The cardinal rule is that communication is key between mortgagor (the borrower) and mortgagee (the lender). If you are going to be late on some mortgage payments or miss some payments entirely, inform your lender immediately. Lenders generally view foreclosure as a costly last-resort option, so it is possible that you will be able to negotiate an agreement with your lender.
One option is forbearance, in which you can make reduced payments or pause mortgage payments for a certain period of time. While you will need to repay the missed payments eventually, this option offers some breathing room for financially struggling mortgagors. Another option, refinancing, allows you to reduce monthly payments by qualifying for a lower interest rate or refinancing into a longer-term loan.
Though the legality of mortgage agreements can be daunting, mortgagors can rest assured that they have access to several resources and rights in the stages leading up to foreclosure. Sumsion Business Law can offer you counsel and assistance in these matters and ensure that you, as a Utah mortgagor, are being treated fairly in this process.