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.
When you take out a loan to purchase residential property in Pennsylvania, most people 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. 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.
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.
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 the 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).
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. If you meet with an approved credit counseling agency, the lender can’t take any legal action, including starting a foreclosure, for 30 days after the meeting. (35 Pa. Stat. Ann. § 1680.403c).
In Pennsylvania, foreclosures are judicial, which means the foreclosing 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.)
The lender initiates the foreclosure by filing a complaint with the court. The complaint is served 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 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 the important facts of the case aren't in dispute, 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, and your property will be sold at a foreclosure sale.
Notice of the foreclosure sale will be:
While Pennsylvania doesn't have a statewide foreclosure mediation program, some Pennsylvania counties have foreclosure diversion (or conciliation) programs and offer conciliation conferences to help borrowers find ways to avoid foreclosure.
A conciliation conference is a face-to-face meeting between the lender and the borrower to reach a workout and avoid foreclosure. Potential outcomes of a conciliation conference include a loan modification, repayment agreement, forbearance agreement, short sale, or deed in lieu of foreclosure.
The requirements and procedures vary widely between programs. For example, it's mandatory for the lender and borrower to participate in the program in some counties. Other programs are opt-in, which means the borrower can choose to participate. Moreover, some counties don't have mediation meetings but rather give the borrower the ability to postpone (or stay) the foreclosure for up to 90 days to provide time to work directly with the lender to avoid foreclosure.
In general, participating in a foreclosure diversion program will delay the foreclosure process. The length of the delay depends on the county. To find out if your county has a foreclosure diversion program, check the official court and county websites. You can also ask a local foreclosure attorney if your county offers this type of help.
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 property's fair market value. (42 Pa. Cons. Stat. Ann. §§ 8103, 5522(b)(2)).
In Pennsylvania, you don't get a redemption period after a foreclosure sale.
If you don’t vacate the property following the foreclosure sale, the new owner will likely offer you a cash-for-keys deal or evict you.
This article contains details on foreclosure laws in Pennsylvania, with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea. How courts and agencies interpret and apply the law can also change. And some rules can even vary within a state. These are just some of the reasons to consider consulting an attorney. 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.