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 owner (the "bank") can go in and secure the home. But sometimes a bank—or its agent—prematurely locks the homeowners out of their own homes, illegally removes personal property, and damages the home itself in the process.
Read on to learn more about your right to occupy your home during foreclosure, when a bank may take steps to secure the property after you fall behind in payments, and what to do to make sure the bank 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 bank 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?)
State law sets specific procedures for foreclosures and evictions.
While you have the right to occupy the home during foreclosure, if you abandon the property, most mortgages (and deeds of trust) give the bank the right to do whatever is reasonable or appropriate to protect its interest in the property. For example, the bank 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—the company that manages your loan account—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 banks 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 inspector deems the home vacant or insecure—which the inspector may determine after just one drive-by visit and 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 designate a property as vacant. When this happens, the company will likely change the locks and remove the occupant’s personal property—like computers, family photographs, and furniture—even though the house is legally occupied. The occupant might not be able to get back into the home for days, and may never have the personal items returned.
Certain field service companies routinely ignore the rights of occupants in the course of securing a home. However, some states (and homeowners) are starting to step up to protect the rights of homeowners.
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.
Also, Maine has a law that cracks down on property preservation companies. Under Maine’s law, property preservation providers are prohibited from breaching the peace while going about their work. It also requires them to:
There are several steps you can take to ensure that your mortgage bank 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, your mortgage servicer will probably call you to discuss the delinquency. When you talk to the servicer, let them know you are still occupying the property. 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.
If the servicer, or a field service company on the servicer's behalf, takes any steps based on an assessment that the property is empty (like illegally entering the property and taking your personal property), send a letter to the bank or servicer informing it in writing that you are still occupying the property and detailing the unlawful actions. Send the letter by certified mail, return receipt requested, so you can prove that you sent it and that the bank or servicer received it.
The field service company may post a notice that it has deemed your property vacant before locking you out or taking other actions. 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 (again, via certified mail, return receipt requested) to prove that you have notified the company 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.