The bank padlocked my door, but my home is still in foreclosure. Is that legal and what should I do?
The answer to this question depends on whether your home is vacant or occupied.
If the house is vacant, the lender can take steps (such as padlocking your door) to secure the property even if its still in foreclosure. Check your mortgage, there’s probably a clause in there that states the lender has the right to take reasonable or appropriate action to protect its interest in the property if you abandon it.
Securing the property means doing things such as:
The lender can legally take these actions if you have abandoned the home.
If you are still living in the home, the bank cannot take possession of it until after the foreclosure. Even then it will need to take proper steps to evict you if you haven’t already left.
If you fall behind in payments, the lender will want to find out if the property is occupied or vacant. This is because abandoned homes are more likely to be vandalized or suffer other forms of damage. Since the home acts as collateral for the loan, the lender wants to prevent anything that might negatively affect the value of the property.
Usually the mortgage servicer (the company collect and processes your monthly mortgage payments) is called upon to make sure the property is secure. It will typically hire a property management firm (called a field service company), which in turn may hire a subcontractor to find out if the property is vacant and perform any actions needed to secure the property.
Keep in mind that, even during a foreclosure, you are still responsible for the upkeep of the home. Sometimes occupied homes are mistakenly categorized as unoccupied if the inspection reveals some evidence that you are no longer residing in the property. For example, if the home is falling into disrepair or the lawn is severely overgrown, this may indicate that you have left the home (even if you're still living there). If you maintain the property during the foreclosure process, there is less chance that your home will be incorrectly deemed unoccupied.
That’s not to say that some companies don’t jump the gun in categorizing a home as vacant. Certain field services companies have been accused of repeatedly:
Various factors can contribute to this happening. Generally, the determination is made quickly, perhaps after just one brief cursory visit to the property. There have been instances of certain companies deeming a home vacant even when there was evidence to the contrary, such as a barking dog inside the home, a car in the driveway, garbage cans placed outside for pickup, or a neighbor’s statement that the home is occupied.
Or, there may be a financial incentive for a company to deem a property vacant since they may make more money that way. (The company may charge $100 to board up the doorway or $60 to change the locks, for example.)
One New York judge has suggested that homeowners who are wrongfully locked out of their own homes should cut off the padlock. The judge, Housing Court Judge Patrick M. Carney, noted that people should leave their house only when they are legally required to do so. (Read more about Judge Carney's advice to homeowners.)
If you come home to find the locks changed or the door padlocked, you should certainly call your mortgage servicer and let them know that you have been illegally locked out of your home. (To figure out who your loan servicer is, look at your monthly mortgage payment coupon.) You should also call the field service company (if you can find out which company did the lockout), though they’ll likely refer you back to the mortgage servicer. You may also want to speak to a qualified attorney who can advise you what to do in your particular circumstances.