Homeowners who have fallen behind on their mortgage payments and are in foreclosure have the legal right to remain in their home until the process has been completed. If a home is vacant, the mortgage lender can go in and secure the home. But recently a disturbing trend has emerged -- banks prematurely locking homeowners out of their own homes, illegally removing personal property, and damaging the home itself in the process.
Read on to learn more about your right to occupy your home during foreclosure, when a lender may take steps to secure the property, and what to do to make sure the lender does not treat your home like it is vacant when it is not.
The foreclosure process works differently in different states. In some states, the lender has to file a lawsuit with the court to foreclose (judicial foreclosure), while in others, it can foreclose without going to court (nonjudicial foreclosure).
Homeowners have the right to remain in the home during the foreclosure process and can only be evicted after the foreclosure is concluded. (Learn more in Nolo’s article When Do You Have to Leave Your Home When It's in Foreclosure?)
While you have the right to occupy the home during foreclosure, if you abandon the property, most mortgages give the lender the right to do whatever is reasonable or appropriate to protect its interest in the property. For example, the lender may do the following things to secure the property if it is vacant:
Generally, the task of securing the property falls on the mortgage servicer (on behalf of the lender), which typically farms out these services (called field services) to property management firms, which are called field service companies (or property preservation companies).
Field service companies enter into contracts with mortgage lenders and servicers to either:
This means that subcontractors often determine the occupancy of homes and take responsibility for preserving them until the homes can be resold after the foreclosure.
Once you become delinquent on your mortgage, the field service company (or its subcontractor) will inspect the property to determine its occupancy status. If the home is deemed vacant or insecure (which can occur after just one visit or without making any effort to contact the potential occupants), the company will take steps to secure the property.
Unfortunately, a field service company or its subcontractors may inaccurately deem a property vacant. When this happens, it will likely change the locks and remove your personal property (such as computers, family photographs, etc.), even though the house is legally occupied. You might not be able to get back into the home for days, and may never have your personal items returned.
Certain field service companies routinely ignore the rights of occupants in the course of securing a home. However, they may not get away with it for long. States (and some homeowners) are starting to step up to protect the rights of homeowners, with Illinois being the first to take on the field service industry.
The Attorney General of Illinois filed a lawsuit accusing the largest company in the industry, Safeguard, of illegally breaking into occupied homes, locking the occupants out of the home, removing personal property, and shutting off utilities to the home, often when there was clear evidence that the property was occupied. Safeguard also misrepresented to homeowners that they were no longer allowed to live in their homes and refused to allow them to re-enter the property when, in fact, the occupants were entitled to stay until the foreclosure was completed.
In one instance, homeowners filed a case against Safeguard in federal court, but the judge dismissed the suit suggesting that it was an issue for state court.
There are several steps you can take to ensure that your mortgage lender or servicer (or the field services company that it hires) doesn’t treat your occupied home as vacant.
If you are behind in your payments, call the mortgage lender or servicer (the company you make your payments to) and let it know you are still occupying the property. (To figure out who your loan servicer is, look at your monthly mortgage payment coupon.)
All loan servicers keep communication logs that make a note of each time you call, along with information about the conversation. While the communication logs typically are not especially detailed, if later on there is a dispute about occupancy, there should be a note in the servicer’s records that you verified that you are still living in the property.
You should also send a letter to the lender or servicer informing it in writing that you are still occupying the property. Send the letter by certified mail, return receipt requested, so you can prove that you sent it and that the lender or servicer received it.
The field service company may post a notice that it has deemed your property vacant before locking you out. Be sure to call the company and let it know that you are still living in the property. It is also a good idea to send a letter (via certified mail, return receipt requested) to prove that you have notified it of your occupancy.
If you are facing foreclosure and have been wrongfully locked out of your home, your personal property has been illegally taken, or your rights otherwise violated in the foreclosure process, you can lodge a complaint with state regulators or file a lawsuit of your own. It is also recommended that you speak to a qualified attorney who can advise you what to do in your particular situation.