What happens after the foreclosure? Eviction, Redemption Periods and Deficiency Judgments

After the foreclosure is complete, which means there has been an auction or foreclosure sale to sell your home to the highest bidder, then people commonly ask the question “what’s next?” At this point, one of two things has happened. One, your house was sold to a bidder at auction and he is the new owner OR there was no bidder and the bank now owns your house.

In either case, the process is almost the same depending on the redemption periods within your state. (FYI, a redemption period is a section of time allowed by law for you to pay the lender what you owe to keep your home. In some states, this redemption period falls after the auction.)

Here’s a general peak of what can happen after a foreclosure, just keep in mind that this varies depending on the state you live in:

AN EVICTION

If you are in the house after the house has been auctioned, then the new owner (or the bank if there was no bidder) will have to go through a legal process to evict you. The eviction process can take anywhere from 5 to 90 days, depending on your state law. You will not be dumped on the street without notice. The sheriff’s department will serve you with an eviction notice and on that notice will be instructions about your rights and the deadline to leave.

If you want more details about the eviction process, you will need to call the small claims court at your local courthouse. Ask how the eviction process works so you know exactly how many days you will have to vacate the house after the auction. They are very helpful and sometimes even have pamphlets available to the public about evictions.

NOTE: It is important to note here that if you are in a post-auction redemption rights state. So the eviction will not start until after the redemption period ends.

An eviction will only occur if the property is transferred out of your name after the auction. Each mortgage can be foreclosed individually. If it is the second mortgage that is auctioned off, then ownership of the property does not transfer to the highest bidder or lender. All that was purchased at the auction is the mortgage or bond on the property. The only way ownership of the property can be transferred at auction is if the first mortgage is foreclosed. In most states, if the second/third mortgage goes to auction and your first mortgage doesn’t, you can’t be evicted since the first mortgage has priority.

THE REDEMPTION PERIOD

A redemption period is an amount of time that allows the homeowner the opportunity to stop the foreclosure by paying the full amount of the loan. Only some states have a redemption period, Wyoming being one of them. This normally starts after the auction and in Wyoming lasts for 3 months. A redemption period is a period of time in which you can sell your home (or use another means to pay the full amount of the loan) and get out of foreclosure that has already taken place. During this time, you cannot be evicted and you do not have to make any house payments. It’s just a period of time allowed by state law to redeem you in the situation.

In the Judicial States, the redemption period may be prior to the auction date. This problem will arise on the short date indicated in the Complaint. You can ask the judge, attorney, or lender about your redemption rights. But again, the redemption rights are still just rights to repay the entire loan in full.

Not all states have redemption rights.

A DEFICIENCY TRIAL

In some cases, the lender may not sell your home at auction for the full amount you owe on the mortgage/loan. When this happens, the lender can pursue what is called a deficiency judgment to recover the rest of that money owed. This is done through the court system, so you will receive notice if this happens and a summons to appear in court. Not all lenders look for a deficiency judgment and even if it is allowed in your state, the lender may or may not choose to look for one after the auction.

Once the court has allowed a judgment for the lender to recover the deficient amount, then, as with any other judgment, they can try to garnish your wages or take your assets to pay off the debt.

In judicial states, when the initial lawsuit is filed to start the foreclosure process, the lender can also request an automatic deficiency judgment in the event the auction does not bring the full amount owed on the mortgage. You’ll need to listen to this during his brief appearance if you decide to go. The court case is also public knowledge, so you can request the details of the court case after the trial date has passed directly from the courthouse or you can go to the registrar’s office and print a copy of the writ of execution for take home and read.

Not all states allow deficiency judgment. Again, each state is different and therefore what happens after foreclosure will vary as well.