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 North Dakota sign a promissory note and mortgage. These documents give homeowners some contractual rights in addition to federal and state legal protections.
In a North Dakota foreclosure, you'll most likely get the right to:
So, don't get caught off guard if you're a North Dakota homeowner who's behind in mortgage payments. Learn about each step in a North Dakota 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 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 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."
If you miss a payment, most loans include a grace period of, say, ten or fifteen days, 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, many North Dakota mortgages 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, if the property is your principal residence, 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 for bankruptcy or asked the servicer not to contact you pursuant to the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.30, 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 North Dakota mortgages 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 for your home in North Dakota, the foreclosure will be judicial.
In North Dakota, the bank serves—usually through the mail—a notice to the homeowner at least 30 days, but not more than 90 days, before filing a foreclosure lawsuit in court. (N.D. Cent. Code § 32-19-20). The notice gives the borrower 30 days to pay the past-due amounts and avoid a foreclosure. (N.D. Cent. Code § 32-19-21).
A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. You'll learn about the suit when you're served a copy of the complaint and a summons. (N.D. Cent. Code § 32-19-29).
If you don't respond to the suit, the lender will ask the court for, and probably receive, a default judgment, which will allow it to hold a foreclosure sale. But if you choose to defend the foreclosure lawsuit, the case will go through the litigation process. The lender might then ask the court to grant summary judgment. A summary judgment motion asks that the court grant judgment in favor of the lender because there's no dispute about the critical aspects of the case. If the court grants summary judgment for the lender—or you lose at trial—the judge will enter a judgment and order your home sold at auction.
The officer making the sale must publish a notice of sale in a newspaper once a week for three successive weeks, and, in some cases, mail copies to interested parties. (N.D. Cent. Code § 28-23-04, § 32-19-08).
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, 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. But in many North Dakota foreclosures, a deficiency judgment isn't allowed.
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 for a short period after that), 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.)
In North Dakota, the borrower has the right to reinstate the loan within 30 days after service of the preforeclosure notice. (N.D. Cent. Code § 32-19-28). Also, many mortgage contracts give the borrower additional time to reinstate. Also, the lender might agree to a later reinstatement.
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.
In some states, the borrower can redeem (repurchase) the property within a specific period after the foreclosure. In North Dakota, the borrower generally gets the right to redeem the property within 60 days after the sale except for property that's abandoned or agricultural. (N.D. Cent. Code § 32-19-18). Abandoned properties are excluded from the law that provides a redemption period and, if the court determines that the real property is abandoned, it may eliminate the redemption period. (N.D. Cent. Code § 32-19-19). If the property is agricultural, the redemption period is 365 days after the bank files the summons and complaint in the office of the clerk of district court or the time of the first publication of the notice by advertisement, but no earlier than 60 days after the sale. (N.D. Cent. Code § 32-19-18).
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 that 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.
In a foreclosure, the borrower's total mortgage debt sometimes exceeds the foreclosure sale price. 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, a "deficiency 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.
North Dakota law prohibits deficiency judgments in foreclosures of residential properties of four or fewer units, one of which the owner occupies as a homestead, on up to 40 contiguous acres. The bank can get a deficiency judgment if the property is agricultural land of more than forty acres; however, the judgment is limited to the difference between the amount of the debt and the fair market value of the land at the time the foreclosure begins. (N.D. Cent. Code § 32-19-03).
In this article, you'll find details on foreclosure laws in North Dakota, with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea.
To find North Dakota's laws, search online for "North Dakota statutes" or "North Dakota laws." Make sure you're reading the most recent, official laws. Usually, the URL will end in ".gov" or the statutes will be on an official state legislature webpage.
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 North Dakota'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).