If you default on your mortgage payments in Puerto Rico, the servicer (on behalf of the loan owner, called the "lender" in this article) will eventually begin a foreclosure. Foreclosures in Puerto Rico go through the court system. The law specifies how foreclosures work and gives you rights and protections throughout the process. In this article, you'll learn about the foreclosure process in Puerto Rico.
When borrowers fall behind ("default") on the mortgage, they must fix or "cure" the problem by bringing the loan current to keep the house. If successful, the borrowers reinstate the loan and resume making the regular payments as if the default never took place.
If the borrowers are unable to cure the default, though, the next step is foreclosure. The law in Puerto Rico is comparable to foreclosure law in many states and incorporates many familiar principles.
A lender can't start the foreclosure in Puerto Rico as soon as the borrowers fall behind. Under federal mortgage servicing laws, which apply in Puerto Rico and the states, the lender generally must wait until the borrowers are more than 120 days delinquent to begin the foreclosure process.
Puerto Rico law also dictates the pacing of the foreclosure. Here are the initial steps that must take place before the foreclosure officially begins.
Notice required by Puerto Rico law. Under Puerto Rico law, the lender is required to give the borrowers a written notice that provides 20 days to cure the default (bring the loan current) before the lender can start the foreclosure process. After the lender sends out the notice of default and the 20 days elapses, the lender can proceed with foreclosing on the home.
The mortgage terms might require a longer cure period. The mortgage contract might require the lender to provide additional time to cure the default. For example, Puerto Rico mortgages sometimes state that the lender must mail the borrowers a notice that gives 30 days to cure the default before starting a foreclosure.
How much it will cost to cure the default. To cure the default and prevent a Puerto Rico foreclosure, the borrowers must pay the exact amount owed, excluding court costs and attorneys' fees. If the borrowers don't cure the default, the lender will foreclose.
Foreclosures in Puerto Rico go through a judicial process in the court system. The lender initiates the foreclosure by filing a brief in court, along with certain documents. The brief must contain an exact breakdown of the following:
The court will then examine the brief. If the lender meets all legal requirements, the court will instruct the marshall to serve the borrowers with a "demand for payment," which gives them 30 days to pay off the total amounts claimed due, along with a copy of a summons to court. The notice further informs the borrowers that if the delinquency isn't cured within 30 days, the home will be sold at auction.
A borrower who disagrees with the foreclosure has 20 days to file an objection to the foreclosure in a document called a "deposition." If the borrower doesn't object or pay the amount due, the home will be sold at auction to the highest bidder after the 30-day period passes. If the borrower objects, and the court resolves the objection in the lender's favor, the auction will be allowed to proceed.
After the auction takes place, the court has ten days to review the record of the transaction. If the lender correctly followed all procedures, the court will confirm the sale, and the proceeds will be used to pay off the mortgage debt.
If the total amount owed on the mortgage exceeds the foreclosure sale price, the difference is a "deficiency." Puerto Rico law allows the lender to seek a personal judgment, called a "deficiency judgment," against the borrowers for this amount.
For instance, if the loan balance were $350,000 and the house sold for $300,000, the lender can generally get a deficiency judgment for $50,000. But the foreclosing lender can't get a deficiency judgment if the mortgage contract is a "non-recourse" loan, which means that the contract prohibits a deficiency judgment.
A redemption period is an amount of time following the foreclosure sale when the borrowers can pay off the total debt, or reimburse the amount paid to the purchaser who bought the home at the foreclosure sale, to reclaim the property.
Puerto Rico doesn't have a redemption period after the sale.
To find and review Puerto Rico's foreclosure laws, go to the Laws of Puerto Rico Unannotated and click on Title 30, Mortgage Law and Regulations. You'll find the foreclosure statutes under Subtitle 4, Chapter 121—Mortgage Foreclosure Proceedings. Statutes change, so checking them is always a good idea. How courts and agencies interpret and apply the law can also change. These are just some of the reasons to consult with an attorney if you're facing a foreclosure.
If you're going through a foreclosure in Puerto Rico and want to learn more about laws that apply to foreclosures, as well as whether you have any defenses to the foreclosure, consider talking to a foreclosure attorney.