If you are a homeowner in Pennsylvania facing the scary prospect of losing your home to foreclosure, don’t be caught off guard. Read on to find out each step in a Pennsylvania foreclosure (from missing your first payment all the way to eviction) and learn about your rights during the process.
Pennsylvania Mortgage Loans
When you take out a loan to purchase residential property in Pennsylvania, you typically sign a promissory note and a mortgage. A promissory note is basically an IOU that contains the promise to repay the loan, as well as the terms for repayment. The mortgage provides security for the loan that is evidenced by a promissory note.
Find out more in our article What’s the Difference Between a Mortgage and a Promissory Note?
To learn more about mortgage terminology, see our Glossary of Foreclosure Terms.
What Happens When You Miss a Payment
If you miss a payment, most loans include a grace period of fifteen days after which time the loan servicer will assess a late fee. (Loan servicers collect and process payments from homeowners, as well as handle loss mitigation applications and foreclosures for defaulted loans.)
To find out the late charge amount and grace period for your loan, look at the promissory note that you signed. This information can also be found on your monthly mortgage statement.
Learn more about fees that the lender can charge if you’re late on mortgage payments.
What Happens When You Fall Behind on a Few Payments
If you miss a couple of mortgage payments, your mortgage servicer will probably send a letter or two reminding you to get caught up, as well as call you to try to collect the payments. Don’t ignore the phone calls and letters. This is a good opportunity to discuss loss mitigation options and attempt to work out an agreement (such as a loan modification, forbearance, or payment plan) so you can avoid foreclosure.
Learn the difference between a loan modification, forbearance agreement, and payment plan.
To get information about these and other options to avoid foreclosure, see our Alternatives to Foreclosure area.
Pre-Foreclosure Loss Mitigation Review Period
Under the federal Consumer Financial Protection Bureau servicing rules that went into effect January 10, 2014, the mortgage servicer must wait until you are more than 120 days delinquent on payments before filing the case in state court to start the foreclosure. This is to give you sufficient time to explore loss mitigation opportunities. (The servicer can still send you notices informing you that you are late in payments and/or that explain what your loss mitigation options are within this pre-foreclosure period.)
Mortgage Contracts Often Require a Breach Letter
Pennsylvania mortgages often contain a clause that requires the lender to send a notice, commonly called a breach letter or demand letter, informing you that your loan is in default before it can accelerate the loan and proceed with foreclosure. (The acceleration clause in the mortgage permits the lender to demand that the entire balance of the loan be repaid if the borrower defaults on the loan.)
The notice must specify:
- the default
- the action required to cure the default
- a date by which the default must be cured, and
- that failure to cure the default on or before the date specified in the notice may result in acceleration of the debt and sale of the property.
Notice of Intent to Foreclose
Before officially starting the foreclosure process, Pennsylvania law requires that the foreclosing party give the homeowner a 30-day notice of intent to foreclose, which gives the homeowner the opportunity to cure the default.
In addition, the foreclosing party must send a second notice explaining homeowner’s 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. (However, if the Pennsylvania Housing Finance Agency does not have funds for emergency mortgage assistance, this notice is not required.)
To learn more about obtaining assistance from the Pennsylvania Housing Finance Agency, go to www.phfa.org. Click on “Homebuyers, Homeowners, & Renters,” then select “Homeowners,” then “Foreclosure Prevention,” and then click on “HEMAP Program.”
In Pennsylvania, foreclosures are judicial, which means the lender (the plaintiff) must file a lawsuit in state court. (In some states, lenders don’t have to go through the court system to foreclose. To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
The lender initiates the foreclosure by filing a complaint with the court. The complaint is served (given) to the homeowner, along with a summons. You have up to 30 days to answer the complaint. (The summons provides 20 days. If you don’t respond in that time, you will receive a 10-day notice advising you that if you fail to file an answer, the plaintiff may seek a default judgment.)
The answer is your opportunity to address each allegation in the complaint, which means you can deny those that you believe are inaccurate. You may also bring up defenses against the foreclosure and claims you may have against the lender. (To learn more, see our Fighting Foreclosure in Court topic area.)
Work out a way to avoid foreclosure in a diversion program. While Pennsylvania does not have a statewide foreclosure mediation program, some Pennsylvania counties have implemented foreclosure diversion (or conciliation) programs that may help you avoid foreclosure. (Learn more about foreclosure diversion programs in Pennsylvania.)
If you cannot come to an agreement with your lender through a foreclosure diversion program and you do not respond to the court action within the specified amount of time, the lender can get a default judgment from the court. This means you automatically lose the case.
On the other hand, if you file an answer, the lender cannot obtain a default judgment. At this point, the lender will most likely file a motion for summary judgment. This type of motion requests that the court grant judgment in favor of the lender because there is no dispute as to the important facts of the case, the homeowner’s defense lacks merit, or does not prove wrongdoing. If summary judgment is denied, then a trial will occur.
If the lender is granted summary judgment (or you lose at trial), the court will enter a final judgment of foreclosure against you and your property will be sold at a foreclosure sale.
Notice of Sale
Notice of the foreclosure sale will be:
- posted on the premises at least 30 days prior to the scheduled sale
- served on the parties to the foreclosure action at least 30 days prior to the scheduled sale, and
- published in a newspaper once a week for three weeks, with the first publication being not less than 21 days before the date of sale.
Reinstatement Before Sale
Reinstatement is when the borrower pays the past-due amounts on the mortgage, plus all costs and fees, in order to bring a delinquent loan current.
Pennsylvania law allows reinstatement up to one hour before the bidding at the foreclosure sale, a maximum of three times in one year.
Learn more about reinstating a loan to avoid foreclosure.
The Foreclosure Sale
At the foreclosure sale, the property will be:
- sold to the highest third-party bidder, or
- revert to the foreclosing lender and become REO.
Most properties go to the foreclosing lender at the foreclosure sale.
Deficiency Judgments in Pennsylvania
When a lender forecloses on a mortgage, the total debt owed by the borrower to the lender frequently exceeds the foreclosure sale price. The difference between the sale price and the total debt is called a “deficiency.” In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount from the borrower.
Learn about methods that creditors can use to collect judgments.
In Pennsylvania, a deficiency judgment is allowed if the foreclosing party files a separate action within six months.
Limitation on deficiency judgments. If the lender is the purchaser at the foreclosure sale, the deficiency is limited by the fair market value of the property. This means the borrower is discharged from all liability up to the amount of the fair market value determined by the court, regardless of the actual amount bid by the lender at the sale.
Learn more about deficiency judgments in Pennsylvania.
A redemption period is the legal right of any mortgage borrower in foreclosure to pay off the total debt, including the principal balance, plus certain additional costs and interest, in order to reclaim the property.
In Pennsylvania, there is no redemption period after the foreclosure sale.
Learn more about redemption periods.
Eviction Following Foreclosure
If you don’t vacate the property following the foreclosure sale, the new owner will likely:
- offer you a cash-for-keys deal (where the new owner offers you money in exchange for you agreeing to move out), or
- evict you.
To learn more about foreclosure in general, ways to defend against foreclosure, and programs to help struggling homeowners avoid foreclosure, visit our Foreclosure Law Center.