Federal and state laws, in theory, establish a structured, predictable foreclosure process and timeline in Delaware. However, lenders sometimes make mistakes and violate the law when processing foreclosures.
So, homeowners facing foreclosure should understand the Delaware foreclosure process, including the specifics of both federal and state laws. If the lender messes up, you might have a defense to the foreclosure.
In a Delaware foreclosure, you'll most likely get the right to
So, don't get caught off guard if you're a Delaware homeowner behind in mortgage payments. Learn about Delaware foreclosure laws and the foreclosure process, from missing your first payment to a foreclosure sale.
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.
Federal laws give protection to homeowners both before and during the foreclosure process. For example, a foreclosure generally can't start until the borrower is more than 120 days late on payments. (12 C.F.R. § 1024.41).
Also, federal law requires lenders to attempt to notify homeowners both over the phone and in writing soon after default to remind them of the missed payment and to discuss options that might resolve the problem. (12 C.F.R. § 1024.39).
Foreclosures in Delaware are judicial, which means a court handles the process. In some other states, foreclosures are nonjudicial, which means they're usually carried out with little (if any) court involvement or oversight.
Here's what homeowners can expect if they default on their mortgage in Delaware.
Most homeowners get at least two foreclosure notices: a notice about the default and a notice of intent to foreclose.
Most mortgages contain language requiring the lender to send the borrower a letter, often called a "breach letter," before starting the foreclosure.
If the home is an owner-occupied residential property of one to four units, Delaware law requires lenders to send homeowners a notice of intent to foreclose by certified and first-class mail at least 45 days before starting the foreclosure. (Del. Code Ann. tit. 10, § 5062B).
In Delaware, a lender must file a lawsuit to foreclose a home.
At least 45 days after the lender sends the notice of intent to foreclose and 120 days after the actual default (in accordance with federal foreclosure laws), the lender begins the lawsuit by filing the initial pleading, called a "complaint," with the court.
Along with the complaint, the lender must file supporting documentation, including a notice of foreclosure mediation if the property is an owner-occupied, one- to four-family primary residential property. Mediation gives the homeowner an opportunity to negotiate with the lender to find a workable solution to avoid foreclosure. The mediation program is scheduled to expire on January 1, 2025. (Del. Code Ann. tit. 10, § 5062C).
After the lender files the complaint and supporting documents, including the mediation notice, the documents are served to the homeowner. A separate notice is also posted on the front door of the home. In Delaware, the paperwork served to a homeowner facing foreclosure is frequently called a "Writ of Scire Facias"—a Latin term for the judicial foreclosure process.
The homeowner gets 20 days to file a response, called an "answer." Homeowners who want to save their home are strongly advised to consult with an attorney about the judicial foreclosure process as soon as possible after service, if not before. Failing to file a timely answer or filing an answer that doesn't meet specific technical legal requirements could result in a default judgment (an automatic win) for the lender.
Delaware law allows the homeowner to file an answer later than 20 days from service, but only if the homeowner has elected to mediate. The answer must be filed on or before the scheduled mediation date. But unless advised differently by an attorney, homeowners should normally file their answer within 20 days of service.
Once the complaint and answer have been filed, the court will issue a Case Scheduling Order, which notifies the parties of specific dates and deadlines, including court appearances, throughout the judicial foreclosure process.
If the court determines the foreclosure is proper, it will enter a judgment against the homeowner. Solutions for avoiding foreclosure can be possible even after judgment, so homeowners shouldn't stop negotiating for a workout option just because a judgment is entered.
After judgment, a public auction of the home is scheduled. The auction will be conducted by the sheriff, usually at the courthouse in the county where the property is located. Notice of the sale must be:
The court must confirm the sale. Upon confirmation, the sale proceeds are applied to the homeowner's debt. If the proceeds exceed the total amount owed, the homeowner is entitled to the excess, assuming there aren't other liens on the property. But if the proceeds fail to satisfy the amount owed, the lender may seek a deficiency judgment in a separate lawsuit against the homeowner.
Up until confirmation, the homeowner may continue living in the home. After the court confirms the sale, though, the new owner, usually the lender, can get an order of possession from the court and evict the foreclosed homeowners from the home.
Again, the lender must file a separate lawsuit after the foreclosure to recover the deficiency. (Del. Code Ann. Tit. 10, § 5002).
The deficiency judgment amount will generally be the difference between the total debt and the foreclosure sale price. However, if the borrower believes that the high bid at the foreclosure sale is grossly disproportionate to the fair market value of the property, the borrower may request that the court set aside the sale or limit the amount of the deficiency judgment. (See Girard Trust Bank v. Castle Apartments, Inc., 379 A.2d 1144 (1977)).
A few potential ways to stop a foreclosure and keep your home include reinstating the loan, redeeming the property, or filing for bankruptcy. Or you might be able to work out a short sale or deed in lieu of foreclosure and avoid a foreclosure. (But you'll have to give up your home with either of these options.)
In Delaware, no law requires the lender to let you reinstate your mortgage loan. However, the language of the mortgage you signed when you took out the loan might give you this right, or your lender might agree to let you get current.
Check your mortgage contract for a right to reinstate. Delaware mortgage contracts often give the borrower the ability to reinstate the loan after a foreclosure starts. Check your mortgage contract to determine whether your mortgage gives you the right to reinstate your mortgage loan.
The lender might permit you to reinstate your loan. In cases where the mortgage doesn't provide you with the right to reinstate, the foreclosing lender might agree to let you reinstate because it would prefer to get a steady stream of payments from you rather than proceed with a foreclosure. If the lender won't agree to let you reinstate, it's probably because the lender has determined that a foreclosure will be more profitable or because it believes you'll default on the payments again.
How much it costs to reinstate your loan. To reinstate, you'll probably have to come up with a lump sum that brings you current on the amounts you owe. This includes all the overdue payments plus fees and costs associated with your default and the foreclosure, such as property inspection and attorneys' fees.
Sometimes, a lender will agree to a partial reinstatement, where you pay part of the overdue amount upfront and then make payments to get current on the remaining amount. To learn the exact amount you must pay to stop the foreclosure, contact your loan servicer or the attorney handling the foreclosure for the lender. You'll then receive a letter showing the reinstatement amount and a good-through date for that amount.
While foreclosed homeowners don't get a redemption period after a completed Delaware foreclosure, they do have what's commonly referred to as an "equitable right of redemption" before the sale. The borrower may pay off the total debt and redeem the home during this time.
Also, in Delaware, the court must confirm the foreclosure sale after it takes place. The borrower can redeem the home at any time before the confirmation. (Del. Code Ann. tit. 10, §§ 5065, 5066).
To redeem, you must pay the total amount of the unpaid loan plus all other lawful charges such as interest, attorney's fees, and costs. Check with the court or consult a Delaware attorney for the exact procedures for redeeming your home.
If you're facing an imminent foreclosure sale, filing for bankruptcy is the best way to stop the sale immediately. Once you file for bankruptcy, an "automatic stay" goes into place. The stay prohibits 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.
For additional information about federal mortgage servicing laws and foreclosure alternatives, visit the Consumer Financial Protection Bureau (CFPB) website.
If you need help understanding the law, want to file an answer to the suit, or have questions about your particular circumstances, consider contacting a local foreclosure attorney. Homeowners facing foreclosure are also encouraged to contact a HUD-approved housing counselor.