Before the foreclosure crisis, which peaked in 2010, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor foreclosing lenders. Now, however, federal and state laws heavily regulate loan servicing and foreclosure processes. And most of the laws give protections to borrowers.
Servicers generally have to provide borrowers with loss mitigation opportunities, account for each foreclosure step, and strictly comply with foreclosure laws. Also, most people who take out a loan to buy a residential property in Nebraska sign a promissory note and a deed of trust, which is like a mortgage. These documents give homeowners some contractual rights in addition to federal and state legal protections.
During the foreclosure process in Nebraska, you'll most likely get the right to:
So, don't get caught off guard if you're a Nebraska homeowner who's behind in mortgage payments. Learn about each step in a Nebraska foreclosure, from missing your first payment to a foreclosure sale.
Once you understand the process, 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 "preforeclosure" stage is the period after you fall behind on your mortgage payments, but before a foreclosure officially starts. (Sometimes, people refer to the period before a foreclosure sale actually 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."
Most home loans include a grace period of ten or fifteen days if you miss a mortgage payment, after which time the servicer will assess a late fee. Each month you miss a payment, the servicer will charge this fee. To find out the late charge amount and grace period for your loan, look at the promissory note you signed. You can also find this information on your monthly mortgage statement.
Also, most Nebraska deeds of trust allow the lender (or the current loan holder, referred to as the "lender" in this article) to take necessary steps to protect its interest in the property. Property inspections are performed to ensure that the home is occupied and appropriately maintained. Inspections, which are generally drive-by, are usually ordered automatically once the loan goes into default and typically cost around $10 or $15.
Additional types of fees the servicer might charge include, among others, fees for broker's price opinions, which are like appraisals, and property preservation costs, such as for yard maintenance or winterizing an abandoned home.
Under federal mortgage servicing laws, the servicer must contact, or attempt to contact, you by phone to discuss loss mitigation options, like a loan modification, forbearance, or repayment plan, no later than 36 days after you miss a payment and again within 36 days after each following delinquency. No later than 45 days after missing a payment, the servicer has to inform you in writing about loss mitigation options that might be available and appoint personnel to help you try to work out a way to avoid foreclosure.
A few exceptions are in place for some of these requirements, though, like if you've filed bankruptcy or asked the servicer not to contact you pursuant to the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.39, 12 C.F.R. § 1024.40).
Federal mortgage servicing laws also prohibit dual tracking (pursuing a foreclosure while a complete loss mitigation application is pending).
Many Nebraska deeds of trust have a provision that requires the lender to send a notice, commonly called a "breach letter," informing you that the loan is in default before the lender can accelerate the loan. The breach letter gives you a chance to cure the default and avoid foreclosure.
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 with ample opportunity to submit a loss mitigation application to the servicer.
If you default on your mortgage payments in Nebraska, the lender may foreclose using a judicial or nonjudicial method.
In Nebraska, judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. If you don't respond with a written answer, then the lender will automatically win the case; but if you choose to defend the foreclosure lawsuit, then 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.
Most lenders opt to use the nonjudicial process because it's quicker and cheaper than litigating the matter in court.
If the lender chooses a nonjudicial foreclosure in Nebraska, it must complete the out-of-court procedures described in the state statutes. After completing the required steps, the lender can sell the home in a foreclosure sale.
Again, most residential foreclosures in Nebraska are nonjudicial. Here's how the process works.
The trustee begins the foreclosure process by recording a notice of default in the county recorder's office, which gives the borrower one month to cure the default. (Neb. Rev. Stat. § 76-1006, Neb. Rev. Stat. § 76-1012). Curing the default is also known as "reinstating" the loan. If the property is used for farming, the borrower gets two months to reinstate. (Neb. Rev. Stat. § 76-1006).
The trustee also mails a copy of the notice of default within ten days after recording it to anyone who previously filed a request for notice in the county records. (Neb. Rev. Stat. § 76-1008).
Nebraska deeds of trust usually have a "request for notices" clause. (Neb. Rev. Stat. § 76-1008). This clause states that the borrower requests that copies of the notice of default and notice of sale be sent to the borrower's address. By including this clause in the loan contract, it is as though the borrower filed a separate request for notice in the county records.
So, the borrower is entitled to get a copy of the notice of default and notice of sale in a foreclosure.
After at least one month passes, if the borrower doesn't reinstate the loan, the trustee publishes a notice of sale in a newspaper once a week for five consecutive weeks and sends a copy at least 20 days before the sale to anyone who has filed a request for notice in the county records. (Neb. Rev. Stat. § 76-1007, § 76-1008).
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 Nebraska, 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, subject to some limitations (see below). If the lender is the highest bidder, the property becomes what's called "Real Estate Owned" (REO).
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 include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. (Of course, if you're able to work out a loss mitigation option, like a loan modification, that will also stop a foreclosure.)
Again, Nebraska law provides you with one month (two, if the property is agricultural) to reinstate the loan after the trustee records the notice of default. (Neb. Rev. Stat. § 76-1006). Also, the deed of trust might give you more time to reinstate. Check the paperwork you signed when you took out the loan to find out if you get more time to get caught up on past-due amounts and, if so, the deadline to reinstate. You can also call your loan servicer and ask if the lender will let you reinstate.
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 with a redemption period after the foreclosure sale, during which they can buy back the home. But under Nebraska law, the borrower doesn't get a right of redemption after a nonjudicial foreclosure. The purchaser at the foreclosure sale receives a trustee's deed following the sale. (Neb. Rev. Stat. § 76-1010).
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, which prohibits the lender from foreclosing on your home or otherwise 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 about the options available to you, speak with a local bankruptcy attorney.
The borrower's total mortgage debt sometimes exceeds the foreclosure sale price in a foreclosure. The difference between the total debt and the sale price is called a "deficiency." For example, say the total debt owed is $400,000, but the home sells for $350,000 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.
After a nonjudicial foreclosure, the bank may get a deficiency judgment against the borrower by filing a lawsuit within three months after the foreclosure sale. But the amount of the deficiency judgment is limited to the lesser of:
In this article, you'll find details on foreclosure laws in Nebraska, with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea. Here are some resources:
For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Although the programs under the Making Home Affordable (MHA) initiative have expired, the MHA website still contains useful information for homeowners facing foreclosure.
How courts and agencies interpret and apply laws can change. And some rules can even vary within a state. These are just some of the reasons to consider consulting a lawyer if you're facing a foreclosure. If you have questions about Nebraska'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.
It's also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options. You can use the CFPB'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, which is open 24 hours a day, seven days a week, at 888-995-HOPE (4673).