If you're having trouble making your mortgage payments and about to go through a foreclosure in South Carolina, you should learn about the process and your rights. Federal and state laws, in theory, establish a structured, predictable foreclosure process.
However, servicers and lenders sometimes make mistakes and violate the law when processing foreclosures. If the servicer or lender makes an error, you might have a defense to the foreclosure.
Read on to learn more about South Carolina foreclosure laws—from missing your first payment until you have to move out of the home—and get valuable information about federal and state laws designed to protect you during the process.
You have specific legal rights in a foreclosure based on federal and state laws and the terms of your mortgage contract. Generally, most homeowners in South Carolina get the right to:
Your rights in a foreclosure can vary depending on your situation.
Federal mortgage servicing laws give various protections to homeowners both before and during the foreclosure process, including:
South Carolina Foreclosures are "judicial," meaning a court handles the process. The lender must file a lawsuit to foreclose the home. (In some other states, however, foreclosures are nonjudicial, which means they're usually carried out with little, if any, court involvement.)
Here's what homeowners can expect if they stop making their mortgage payments in South Carolina.
South Carolina doesn't have a law requiring the lender to send a notice to the homeowner before filing a foreclosure lawsuit. But most mortgages contain language requiring the lender to send the homeowner a letter, typically called a "breach letter," and sometimes other notices before starting a foreclosure.
Check your loan documents to find out what notices you're entitled to receive.
At least 120 days after the delinquency date (under federal foreclosure laws), and after any notice periods the mortgage requires, the servicer begins the lawsuit by filing the initial pleading, called a "complaint," with the court.
After the servicer files the complaint, it must be served on the homeowner, along with a summons. The summons tells the homeowner about the suit, where the case is filed, how to contact the lender's attorney, and that the homeowner's response, called an "answer," must be filed within 30 days after the complaint and summons are served. (S.C. Rules Civ. Proc. Rule 12(a)).
If the homeowner files an answer, a judge will determine the validity of the foreclosure. If the court determines the foreclosure is proper, it will enter a judgment against the homeowner. If the homeowner doesn't file an answer, the lender will likely get a default judgment, which means the lender wins the case.
Before the sale, the homeowner has the right to pay off the entire debt and stop the sale from happening, which is called the right of "redemption."
After judgment, a public auction of the home is scheduled. Notice of the sale must be posted in three public places in the county, including the courthouse, and published in a local newspaper once a week for three consecutive weeks before the sale. (S.C. Code § 15-39-650, § 15-39-660).
The auction will be conducted by a master-in-equity, referee, or sheriff, depending on the county. It will usually be held at the courthouse in the county where the property is located.
The proceeds of the sale are applied to the homeowner's mortgage debt. If the proceeds exceed the total amount owed, the homeowner is entitled to the excess, assuming there aren't other liens on the property. But if the proceeds fail to satisfy the amount owed entirely, the lender may seek a deficiency judgment (see below) against the homeowner.
If the lender reserves the right to seek a deficiency judgment, bidding on the property must remain open for 30 days for an upset bid period (see below) after the foreclosure sale. So, many lenders waive their right to a deficiency judgment to avoid this 30-day period.
Once the sale is final, either immediately after the sale or after 30 days if a deficiency judgment is sought, the homeowner must vacate the property or face eviction.
In a South Carolina 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 $600,000, but the home sells for $550,000 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. In most cases, once the lender gets a deficiency judgment, the lender may collect this amount (in the above example, $50,000) from the borrower.
Deficiency judgments are allowed in South Carolina.
Generally, the lender has to reserve its right to a deficiency in the complaint. But if the lender waives the right to a deficiency judgment in the complaint or thereafter, it can't get one. (S.C. Code § 29-3-660 and S.C. Rules Civ. Proc. Rule 71(b)).
If the lender waives the deficiency judgment, the sale doesn't have an upset bid period. An "upset bid" happens when someone can make a higher bid after the foreclosure sale and become the winning bidder.
In South Carolina, unless the foreclosure paperwork says that no personal or deficiency judgment is demanded or any right to such judgment is expressly waived in writing, the bidding doesn't close on the day of the foreclosure sale. Instead, bidding remains open until the 30th day after the sale, exclusive of the sale day.
So, in many cases, the lender will waive a deficiency judgment because an upset bid period delays the completion of the foreclosure process. (S.C. Code § 15-39-720, § 15-39-760, S.C. Rules Civ. Proc. Rule 71(b)).
Even if the lender seeks a deficiency judgment, if you feel that the foreclosure sale price was less than the property's true value, in most cases, you may ask the court for an order of appraisal within 30 days of the sale. (S.C. Code § 29-3-680).
You, the lender, and judge then each designate an appraiser to determine the fair market value of the property as of the sale date. (S.C. Code § 29-3-710). Once the appraisal has been completed (a majority of the appraisers must agree on the value), the deficiency will be limited to the total outstanding debt minus the fair market value. (S.C. Code § 29-3-740).
But under South Carolina law, you may waive your appraisal rights (S.C. Code § 29-3-680)—for example, in the mortgage—unless the foreclosure relates to a dwelling place, as defined in S.C. Code § 12-37-250 (basically, if the property is your permanent home and legal residence), or to a consumer credit transaction. (S.C. Code § 37-1-301(11)).
If you go through a foreclosure and a court orders you to pay a deficiency judgment, you might be able to use bankruptcy to eliminate the debt. Or you might have a defense to the deficiency. And keep in mind you might have the right to limit the deficiency to the total outstanding debt minus the fair market value.
If you want to keep your home, you might qualify for a loan modification, forbearance, or repayment agreement. If you want to give up the property but not go through a foreclosure, you might be able to do a short sale or deed in lieu of foreclosure. And if the government owns or backs your loan (for example, if you have an FHA-insured loan), you might qualify for a special loss mitigation option.
Also, while South Carolina law doesn't expressly provide a right to reinstate the loan by getting caught up on the past-due amounts, many mortgages have a clause giving borrowers that right. Check your mortgage contract to find out if you get a reinstatement right. If not, the lender might agree to let you reinstate the loan.
Again, another way to stop a foreclosure is by "redeeming" the property. To redeem, you must pay off the full loan amount before the foreclosure sale.
In some states, the borrower may redeem the home by paying off the entire mortgage debt, including interest and various other amounts, within a specific period after a foreclosure sale. However, South Carolina law doesn't give the borrower a right of redemption after the sale.
However, you could potentially reclaim the home by making an upset bid if the lender doesn't waive a deficiency judgment in the foreclosure action and the court sets a 30-day upset bid period following the sale.
If you lose your home to a foreclosure, this information will remain on your credit reports for seven years. The foreclosure will also lower your credit scores. (What's in your credit reports affects your credit scores.)
A foreclosure will also affect your ability to purchase another home in the future. Generally, you'll have to go through a waiting period before getting another mortgage. Exactly how long you'll have to wait depends on the type of loan and your financial circumstances.
Get tips on what to do—and what not to do—if you're facing a foreclosure in Foreclosure Do's and Don'ts.
Find out if foreclosures are on the rise.
If you need help understanding the law, want to file an answer to the foreclosure suit, or have questions about your particular circumstances, consider contacting a local foreclosure attorney.
Homeowners facing foreclosure are also encouraged to contact a HUD-approved housing counselor.