In early 2021, President Joe Biden signed the American Rescue Plan Act into law. This law created a Homeowner Assistance Fund, a federal program, to give $10 billion to the states to help households that are behind on their mortgages and other housing-related expenses due to COVID-19.
Eligible homeowners in Tennessee who’ve experienced a financial hardship because of COVID-19 can get some of the $168 million allocated to the state—up to $40,000 per household—from the Tennessee Homeowner Assistance Fund (TNHAF) program. This program uses federal money to help homeowners in Tennessee make mortgage payments so they can avoid foreclosure, as well as pay other housing-related expenses like delinquent property taxes, homeowners’ association fees, and insurance.
The TNHAF program offers three kinds of assistance to eligible homeowners:
You need to specify what kind of assistance you need during the application process. After your application is approved, the underwriter will determine the type of assistance for which you qualify. If you qualify, the money can be applied to:
To qualify for relief from this program, you must have suffered a financial hardship (a material reduction in income or an increase in living expenses) after January 21, 2020, because of COVID-19. You must also currently own and occupy the property as your primary residence, and your annual household income must be less than $119,850.00.
In addition, you’ll probably have to meet some other guidelines.
Assistance is structured as a forgivable grant that you don’t have to repay. TNHAF payments go directly to the loan servicer or other approved entity, not to homeowners.
Once your application is approved, you’ll need to take a homeowner education course, which explains various options for loss mitigation and budgeting, among other things, that might help you determine what option is best for your specific situation.
To apply for help from this program, go to the Tennessee Homeowner Assistance Fund program website and click on the designated button to access the application portal. You’ll have to provide some documentation with your application, like mortgage statements, proof of income (such as pay stubs or tax returns), and a government-issued ID (like a driver’s license).
If your application is denied, you may appeal the decision within 30 days.
The program will continue until the earlier of September 30, 2026, or when all of the funds allotted to the program have been exhausted. If you think you might qualify, it's best to apply as soon as possible.
If you get an unsolicited offer by phone, in the U.S. mail, through email, or by text message offering mortgage relief or foreclosure rescue services, be wary. Scammers sometimes target homeowners who’ve been affected by COVID-19.
The TNHAF program is free. If anyone asks you to pay a fee to get housing counseling or foreclosure prevention services from this program, it’s a scam.
Call 855-890-8073 or go to the TNHAF website if you need more information.
If you need help with your application, contact a HUD-approved housing counselor who will assist you at no cost. To find a counselor near you, go to HUD's website or call 800-569-4287.
]]>Also, most people who take out a loan to buy a residential property in Tennessee sign a promissory note and deed of trust. These documents usually give homeowners certain contractual rights after a home loan default.
So, don't get caught off guard if you're a homeowner behind in mortgage payments. Learn about foreclosure laws in Tennessee and how the Tennessee foreclosure process works, from missing your first payment to a foreclosure sale.
In a Tennessee foreclosure, you’ll most likely get the right to:
Once you understand the Tennessee foreclosure process and your rights, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.
The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale happens as "preforeclosure," too.)
During this time, the servicer can charge you various fees, like late charges and inspection fees, and, in most cases, must inform you about ways to avoid foreclosure and send you a preforeclosure notice called a “breach letter.”
Under federal law, the servicer usually can’t officially begin a foreclosure until you're more than 120 days past due on payments, subject to a few exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners ample opportunity to submit a loss mitigation application to the servicer.
If you default on your mortgage payments in Tennessee, the lender may foreclose using a judicial or nonjudicial method.
A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. The lender will automatically win the case if you don’t respond with a written answer.
But if you choose to defend the foreclosure lawsuit, the court will review the evidence and determine the winner. If the lender wins, the judge will enter a judgment and order your home sold at auction.
If the lender chooses a nonjudicial foreclosure, it must complete the out-of-court procedures described in the state statutes. After completing the required steps, the lender can sell the home at a foreclosure sale.
Most lenders opt for the nonjudicial process because it’s quicker and cheaper than litigating the matter in court.
Again, most residential foreclosures in Tennessee are nonjudicial. Here’s how the process works.
The lender must either publish notice of the foreclosure sale in a newspaper at least 20 days before the sale or post notice in several public places 30 days before the sale if the county doesn’t have a newspaper. (Tenn. Code §§ 35-5-101 to 35-5-103). The lender must also mail you (the borrower) a copy of the notice of sale on or before the first publication date. (Tenn. Code § 35-5-101). Then, the lender holds a foreclosure sale.
The sale is an auction, which is open to the public. At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less.
In some states, including Tennessee, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower (see below). The property becomes “Real Estate Owned” (REO) if the lender is the highest bidder.
But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds—that is, money over and above what’s needed to pay off all the liens on your property—you're entitled to that surplus money.
A few potential ways to stop a foreclosure and keep your home include reinstating the loan, redeeming the property, or filing for bankruptcy. Working out a loss mitigation option, like a loan modification, will also stop a foreclosure.
Or you might be able to work out a short sale or deed in lieu of foreclosure and avoid foreclosure. (But you'll have to give up your home with a short sale or deed in lieu of foreclosure transaction.)
Tennessee law doesn't provide a statutory right to reinstate the loan before the sale, except for high-cost home loans. (Tenn. Code § 45-20-104).
But many deeds of trust, like the uniform Fannie Mae/Freddie Mac Deed of Trust, provide the borrower the right to cure the default after acceleration and reinstate the loan. Check your loan documents to determine if you get a reinstatement right and, if so, the deadline to complete one.
One way to stop a foreclosure is by “redeeming” the property. To redeem, you have to pay off the full amount of the loan before the foreclosure sale.
Some states also provide foreclosed borrowers a redemption period after the foreclosure sale, during which they can buy back the home. In Tennessee, the borrower gets two years after the foreclosure to redeem the property unless the mortgage or deed of trust expressly waives the right of redemption, which these documents frequently do. (Tenn. Code §§ 66-8-101 through 66-8-103).
Check your loan documents to determine if you waived your redemption rights when taking the loan.
If you're facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy.
Once you file for bankruptcy, something called an "automatic stay" goes into effect. The stay functions as an injunction, prohibiting the lender from foreclosing on your home or trying to collect its debt, at least temporarily.
In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out the options available, speak with a local bankruptcy attorney.
The federal Servicemembers Civil Relief Act provides legal protections to military personnel who are in danger of foreclosure.
Under state law, if a member of a reserve or Tennessee National Guard unit entered into a mortgage or deed of trust to purchase a home, and is subsequently called into active military service outside the U.S. during hostilities, the lender can't foreclose until 90 days after the servicemember returns to the state. (Tenn. Code § 26-1-111).
In a foreclosure, the borrower’s total mortgage debt frequently exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a “deficiency.” For example, say the total debt owed is $300,000, but the home sells for $250,000 at the foreclosure sale. The deficiency is $50,000.
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—in our example, $50,000—from the borrower.
Tennessee law allows the lender to get a deficiency judgment after a foreclosure.
In Tennessee, the foreclosing lender can file a lawsuit after the nonjudicial foreclosure to get a deficiency judgment. The deficiency amount may be limited to the difference between the outstanding debt and the property’s fair market value at the time of the sale if the borrower shows that the sale price was materially less than the property’s value. (Tenn. Code § 35-5-117).
A foreclosure could result in serious consequences, like lower credit scores, a deficiency judgment (as discussed above), or tax ramifications.
For more information on federal mortgage servicing laws and foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Get tips on what to do—and what not to do—if you're facing a foreclosure.
Learn about last-minute strategies to stop foreclosure.
Find out if foreclosures are on the rise.
If you have questions about Tennessee’s foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney. Talking to a HUD-approved housing counselor about different loss mitigation options is also a good idea.
]]>In most states, including Tennessee, if a foreclosure sale results in a deficiency, the lender may get a "deficiency judgment" against the borrower for the deficiency amount. But in Tennessee, the borrower can ask the court to limit the deficiency judgment amount based on the home's fair market value.
If you default on your mortgage loan, the lender can go through a legal process called "foreclosure" to sell your home and repay the outstanding debt. After the lender fulfills all the legal requirements for foreclosure, the final step in a judicial or nonjudicial foreclosure is the foreclosure sale, where the home is sold to a new owner at a public auction.
The foreclosing lender submits the first bid at the sale, a “credit bid.” With a credit bid, the lender gets a credit in the amount of the borrower's debt. The lender can bid up to the total amount of the debt, including foreclosure fees and costs, or it might bid less. Most of the time, the lender makes the highest bid at the sale and becomes the new owner of the property because no one else bids. If the lender buys the property at the sale and gets title to the home, the property is considered "real estate owned" (REO).
Lenders regularly bid less than the total amount of a borrower’s mortgage debt at foreclosure sales.
When the lender gains ownership of a property through the foreclosure process, and if state law allows it, the lender can seek a personal judgment against the borrower to recover the deficiency, if there is one. This kind of money judgment is called a “deficiency judgment.”
In some states, the lender may ask for a deficiency judgment as part of a judicial foreclosure process. In other states, the lender has to file a separate lawsuit against the borrower after the foreclosure to get a deficiency judgment.
But if the sale price is equal to, or more than, the mortgage debt amount, you’re off the hook because no deficiency exists—even if the lender can’t resell the property for the same amount after the foreclosure sale. In fact, if the sale results in excess proceeds, you might be entitled to that extra money following the foreclosure auction.
However, if any junior liens were on the home, like a second mortgage or HELOC, or a creditor recorded a judgment lien against the property, those parties get the funds to satisfy the amount they’re owed. Then, any proceeds left over after paying off these liens belong to the foreclosed homeowner.
State law sometimes imposes limits on deficiency judgments. Some states restrict deficiency judgment amounts, such as by requiring that the borrower get credit for the home’s fair market value if the foreclosure sale price is less. That is, the property’s fair market value is substituted for the foreclosure sale price when calculating the deficiency amount.
Other states limit set time limits for how long lenders get to seek a deficiency judgment against a borrower, typically ranging from three months to one year after the foreclosure sale. (To find out the time limit in your state, talk to a foreclosure lawyer.) Also, various states require specific procedural requirements to get a deficiency judgment, while specific states don’t allow deficiency judgments in some circumstances, like after nonjudicial foreclosures.
Generally, once a lender gets a deficiency judgment, it may collect this amount (in the example above, $50,000) from the borrower using regular collection methods, like garnishing wages or levying a bank account.
Even if your lender gets a deficiency judgment, you can probably eliminate your liability for a deficiency judgment, like many other dischargeable debts, in a Chapter 7 or Chapter 13 bankruptcy.
Even if your lender has the right under state law to go after you for a deficiency judgment, it might decide not to do so—especially if you don’t have many assets to satisfy the judgment. The lender might decide it isn’t worth the expense and effort of getting a deficiency judgment.
Still, you should know whether your lender can pursue you for a deficiency after a foreclosure. Also, even if the lender decides not to sue you for a deficiency judgment, it could later sell the debt to a debt buyer who might file a lawsuit against you for the deficiency later on.
Most foreclosures in Tennessee are nonjudicial, which means the lender doesn’t have to go through state court to foreclose. The lender could alternatively choose to foreclose through the state court system, called a "judicial foreclosure."
But in states with a nonjudicial process, lenders almost always choose this route rather than pursuing a judicial foreclosure because an out-of-court foreclosure is relatively quick and inexpensive.
Deficiency judgments are allowed with both nonjudical and judicial foreclosures in Tennessee. The amount of the deficiency judgment is generally (unless the borrower can show fraud, collusion, misconduct, or irregularity in the sale process), the difference between:
But if the borrower proves by a preponderance of the evidence that the property sold for an amount that’s materially less than the property’s fair market value at the foreclosure sale, then the court handling the matter will limit the deficiency judgment to the borrower’s total debt minus the home’s fair market value at the time of the sale. (Tenn. Code Ann. § 35-5-117).
Generally, when a senior lienholder forecloses, any junior liens—like second mortgages and HELOCs, among others—are also foreclosed, and those junior lienholders lose their security interest in the real estate. In this situation, junior lienholders are sometimes called "sold-out junior lienholders." But that doesn't mean you're off the hook for the money you still owe to junior lienholders.
Suppose a junior lienholder is sold out in this manner, and the foreclosure sale proceeds weren't sufficient to pay what you owe to that junior lienholder. In that case, the junior lienholder can sue you personally on the loan’s promissory note. So, if the equity in your home doesn’t cover second and third mortgages, for example, you might face lawsuits from those lenders to collect the balance of those loans.
If you have questions about Tennessee’s foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.
Talking to a HUD-approved housing counselor about different loss mitigation options is also a good idea. You can use the Consumer Financial Protection Bureau's Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area. You can also call the Homeownership Preservation Foundation (HOPE) Hotline, open 24 hours a day, seven days a week, at 888-995-HOPE (4673).
]]>Also, Tennessee law provides consumers with several protections regarding timeshare transactions. For instance, state law prohibits the timeshare developer from using false or misleading advertisements to entice you to buy a timeshare, regulates prize and gift promotions when used to sell timeshares, and provides protections if you want to resell a timeshare.
Even though Tennessee law provides several protections for timeshare purchasers, you still need to be cautious when buying a timeshare. And you should understand that if you take out a mortgage loan to buy a deeded timeshare and stop making the payments, the lender, usually the resort developer, will probably foreclose.
In addition, timeshare owners typically must pay annual maintenance fees and special assessments. If, as an owner, you don't pay the fees and assessments, you might face a lawsuit for a money judgment or a foreclosure of your timeshare. (With a right-to-use timeshare, people generally sign a contract and agree to make monthly payments. While a developer may foreclose a deeded timeshare, a right-to-use timeshare is typically repossessed, which is a different legal process than a foreclosure.)
In Tennessee, a timeshare contract can be canceled within:
Under Tennessee law, the right to cancel can’t be waived. (Tenn. Code Ann. § 66-32-114(c).)
A public offering statement contains general information about the timeshare development. In a Tennessee timeshare sale, the timeshare developer must provide the purchaser with a copy of the public offering statement before transferring the timeshare and no later than the sales contract date. A timeshare contract is also voidable until you receive the public offering statement. (Tenn. Code Ann. § 66-32-114(a).)
The public offering statement must disclose important information about the timeshare, including the developer's name and principal address, a general description of the timeshare units, any financing the developer offers, and information about canceling the contract. (Tenn. Code Ann. § 66-32-112.)
To cancel the timeshare purchase, you may:
If you cancel, the seller (usually the developer) can’t charge a penalty and has to refund the money you paid within 30 days of receiving your cancellation notice. (Tenn. Code Ann. § 66-32-114(a).)
Timeshare salespeople are known for using hard-sell tactics and misrepresentations to get you to make a snap decision about buying a timeshare. Tennessee law protects timeshare buyers by:
In Tennessee, when you purchase a timeshare, the developer must put any money you pay in connection with the purchase into an escrow account. (Tenn. Code Ann. § 66-32-113.)
The funds will be released:
The point of the escrow requirement is to protect your right to a refund if you cancel the sales agreement during the cancellation period.
Tennessee law prohibits timeshare salespersons from using false or misleading statements when advertising timeshare sales. (Tenn. Code Ann. § 66-32-131.)
So, for instance, a timeshare seller can’t advertise the profit potential of the timeshare (unless the statement isn’t false or misleading), make a prediction that the timeshare will increase in value, or misrepresent the characteristics of the timeshare, among other things. (Tenn. Code Ann. § 66-32-132.)
Sometimes, timeshare sellers offer gifts or prizes to potential buyers to get them to attend a sales presentation. Tennessee law regulates promotional offers in several ways. For instance, timeshare sellers can’t:
Timeshare owners can find it extremely difficult to sell their timeshares. So, scam artists sometimes falsely tell a timeshare owner that the company has a ready and willing buyer.
But the timeshare owner must pay hundreds or thousands of dollars in upfront fees to process the transaction. After the timeshare owner pays the fees, the scammer often disappears, or the buyer never materializes.
Tennessee law protects consumers from this type of resale scam in different ways. For example, state law requires a timeshare resale agreement to be in writing and prohibits the reseller from accepting an advance fee before actually selling the timeshare. Resellers must also disclose that there’s no guarantee that a timeshare can be sold at any particular price or within any particular amount of time. (Tenn. Code Ann. § 66-32-137.)
In Tennessee, if you take out a loan to purchase an interest in a deeded timeshare and fail to make your mortgage payments, the lender (again, typically, the developer) might foreclose.
In addition to monthly mortgage payments, timeshare owners are ordinarily responsible for maintenance fees, special assessments, utilities, and taxes, collectively called "assessments." In Tennessee, you might also face a foreclosure if you fall behind in the timeshare assessments.
A few of the various options to avoid a timeshare foreclosure include:
If you want more information about timeshare laws in your state or need assistance canceling a timeshare, consider talking to a real estate attorney. Contact a foreclosure attorney if you're facing a timeshare foreclosure and have questions about the process or your options.
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