Before the foreclosure crisis, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor foreclosing lenders. However, many federal and state laws now give protections to borrowers. Servicers generally must provide borrowers with loss mitigation opportunities, account for each foreclosure step, and carefully 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 contractual rights during a foreclosure.
So, don't get caught off guard if you're a Nebraska homeowner behind in mortgage payments. Learn about each step in a Nebraska foreclosure, from missing your first payment to a foreclosure sale.
During the foreclosure process in Nebraska, you'll most likely get the right to:
Once you understand the process and your rights during a foreclosure, 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 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.
During this time, the servicer can charge you various fees, including late and inspection fees, and, in most cases, must let you know how to avoid foreclosure, and send you a breach letter (a preforeclosure notice).
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 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, 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.
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.
Most lenders opt for the nonjudicial process because it's quicker and cheaper than litigation in court.
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).
The sale will be held at the time and place designated in the notice of sale and between 9:00 a.m. and 5:00 p.m. (Neb. Rev. Stat. § 76-1007).
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 "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, you're entitled to the surplus money left over after all other liens (if any) are paid off.
A few potential ways to stop a foreclosure and keep your home include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. Working out a loss mitigation option, like a loan modification, will also stop a foreclosure.
Or you might be able to work out a short sale or deed in lieu of foreclosure and avoid foreclosure. (But you'll have to give up your home with a short sale or deed in lieu of foreclosure transaction.)
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 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 federal Servicemembers Civil Relief Act provides legal protections to military personnel, including those facing a foreclosure.
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.
Deficiency judgments are generally allowed after a nonjudicial foreclosure in Nebraska.
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:
For more information on federal mortgage servicing laws and foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Get tips on what to do—and what not to do—if you're facing a foreclosure.
Find out if foreclosures are on the rise.
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.
Talking to a HUD-approved housing counselor about different loss mitigation options is also a good idea.