If you're a homeowner in Pennsylvania facing the scary prospect of losing your home to foreclosure, don’t be caught off guard. Read on to find out each step in a Pennsylvania foreclosure—from missing your first payment all the way to eviction—and learn about your rights during the process. (Learn the do's and don'ts when you're facing a foreclosure.)
When you take out a loan to purchase residential property in Pennsylvania, you typically sign a promissory note and a mortgage. A promissory note is basically an IOU that contains the promise to repay the loan, as well as the terms for repayment. The mortgage provides security for the loan that is evidenced by a promissory note.
If you miss a payment, most loans include a grace period after which time the loan servicer will assess a late fee. Each time you miss a payment, the servicer can charge this fee to your account. (Learn more about fees that the lender can charge if you’re late on mortgage payments.)
To find out the late charge amount and grace period for your loan, look at the promissory note that you signed. This information can also be found on your monthly mortgage statement.
In most cases, federal mortgage servicing laws require the servicer to contact you by phone and in writing during the preforeclosure period. (12 C.F.R. § 1024.39). Don’t ignore the phone calls and letters. They offer a good opportunity for you to discuss loss mitigation options —like a loan modification, forbearance, or payment plan—with the servicer.
Also, federal law generally requires the servicer to wait until you're more than 120 days delinquent on payments before officially starting a foreclosure. (To learn more, read How Soon Can Foreclosure Begin?)
Before officially starting the foreclosure process, Pennsylvania law requires that the foreclosing party give a 30-day notice of intent to foreclose, which gives the homeowner the opportunity to cure the default. But this notice isn't required if the home is abandoned. (41 Pa. Stat. Ann. § 403).
In addition, in most cases, the foreclosing party must send a notice explaining homeowner’s rights and describing what help is available, including the right to apply to the Pennsylvania Housing Finance Agency under the Homeowners' Emergency Mortgage Assistance Program (HEMAP) for assistance. (35 Pa. Stat. Ann. § 1680.403c). (To learn more about obtaining assistance from the Pennsylvania Housing Finance Agency, go to www.phfa.org. Click on “Homeowners,” then “Trouble Paying Your Mortgage?” and then click on “Homeowners' Emergency Mortgage Assistance Program.”)
The notice must also tell the borrower of the default and give 30 days (plus three days to account for mailing time) to have a face-to-face meeting with a local consumer credit counseling agency to try to resolve the default. (35 Pa. Stat. Ann. § 1680.403c).
In Pennsylvania, foreclosures are judicial, which means the lender (the plaintiff) must file a lawsuit in state court. (In some states, lenders don’t have to go through the court system to foreclose. To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
The lender initiates the foreclosure by filing a complaint with the court. The complaint is served (given) to the homeowner, along with a summons. You'll get a limited number of days to respond by filing an answer to the complaint. The answer is your opportunity to address each allegation in the complaint, which means you can deny those that you believe are inaccurate. You may also bring up defenses against the foreclosure and claims you may have against the lender. If you don’t respond, the plaintiff may seek a default judgment.
On the other hand, if you file an answer, the lender can't obtain a default judgment. At this point, the lender will most likely file a motion for summary judgment. This type of motion requests that the court grant judgment in favor of the lender because there is no dispute as to the important facts of the case, the homeowner’s defense lacks merit, or the homeowner didn't prove wrongdoing on the part of the lender or servicer. If summary judgment is denied, then a trial will occur.
If the lender is granted summary judgment (or you lose at trial), the court will enter a final judgment of foreclosure against you and your property will be sold at a foreclosure sale.
Notice of the foreclosure sale will be:
Pennsylvania law allows reinstatement up to one hour before the bidding at the foreclosure sale, a maximum of three times in any calendar year. (41 Pa. Stat. Ann. § 404).
At the foreclosure sale, the property will be sold to the highest bidder, which is often the foreclosing lender. (The lender usually makes a credit bid at the foreclosure sale.) If the lender is the highest bidder, the property becomes REO.
In Pennsylvania, a deficiency judgment is allowed if the foreclosing party files a separate action within six months.
If the lender is the purchaser at the foreclosure sale, the deficiency is limited by the fair market value of the property. (42 Pa. Cons. Stat. Ann. §§ 8103, 5522(b)(2)). (Learn more about deficiency judgments in Pennsylvania.)
In Pennsylvania, there is no redemption period after the foreclosure sale.
If you don’t vacate the property following the foreclosure sale, the new owner will likely:
If you need more information about how foreclosures work in Pennsylvania, or want to learn whether you have any potential defenses to a foreclosure, consider talking to a foreclosure lawyer.