People who take out a loan to buy a home typically sign either a mortgage or deed of trust. This document gives the lender (or subsequent owner of the loan) the right to sell the property through a process called foreclosure if the borrower fails to make the payments or breaches the agreement in some other way. The foreclosure process will be governed, in large part, by state law—and Montana’s foreclosure laws are different from other states.
Read on to learn the most important aspects of Montana’s foreclosure laws.
In Montana, the laws that cover foreclosures are in Title 71 of the Montana Code Annotated.
A Montana foreclosure can be either judicial or nonjudicial. Most foreclosures, though, are nonjudicial under the Small Tract Financing Act of Montana. (Mont. Code Ann. §§ 71-1-301 through 71-1-321).
Under the Small Tract Financing Act, the trustee has to record and mail a notice to the borrower at least 120 days before the sale, as well as:
The borrower may reinstate the loan by paying the overdue amounts at any time before the sale. (Mont. Code Ann. § 71-1-312).
If the property is foreclosed nonjudicially under the Small Tract Financing Act, the borrower doesn’t get a redemption period after the sale. (Mont. Code Ann. § 71-1-318). The borrower can, however, redeem the property before the sale by paying off the full outstanding amount of the loan, including foreclosure fees and costs.
In Montana, the lender can’t get a deficiency judgment following a nonjudicial foreclosure of a trust indenture. (Mont. Code Ann. § 71-1-317).
A trust indenture may be foreclosed judicially, but the lender can’t get a deficiency judgment if the property is an occupied, single-family residence. (First State Bank of Forsyth v. Chunkapura, 226 Mont. 54, 734 P.2d 1203 (1987)).
Under the Small Tract Financing Act, the purchaser at the foreclosure sale is entitled to possession of the property on the tenth day following the sale. If the foreclosed homeowners still occupy the home at this time, the purchaser will likely start eviction procedures. (Mont. Code Ann. § 71-1-319).
This article summarizes the state laws associated with the most common foreclosure process used in Montana, and doesn’t tell the entire story. Also, keep in mind that various federal laws also protect borrowers in the foreclosure process. If you're going through a foreclosure in Montana and want to learn more about state and federal laws that apply to foreclosures, as well as whether you have any defenses to the foreclosure, consider talking to a foreclosure attorney.
To get information about different ways to avoid foreclosure—like with a loan modification, short sale, or deed in lieu of foreclosure—speak to an attorney or a HUD-approved housing counselor.