In Kentucky, as well as all other states, homeowners who miss a mortgage payment don’t have to worry that their lender will immediately take away their home. Under a 2014 federal law, you typically get 120 days to try to find a way to avoid foreclosure before the process can start. If you don’t qualify for any avoidance options—or if you don’t apply—then the lender can initiate a foreclosure lawsuit in Kentucky state court.
In this article, you’ll learn more about Kentucky foreclosure procedures and ways that Kentucky law might help you avoid a foreclosure altogether. (To learn what to do—and what not do—if you’re facing a foreclosure, see Foreclosure Do’s and Don’ts.)
If you don't make your mortgage payments, your loan goes into “default.” A foreclosure can occur after you default—but it doesn’t usually happen immediately. In 2014, a federal law went into effect that gives most struggling homeowners a chance to get back on their feet by forcing the servicer to wait 120 days after the missed payment before beginning the foreclosure process. (To learn more about the law that delays the beginning of a foreclosure for 120 days, see How Soon Can Foreclosure Begin?)
While this 120-day period is running, you can apply for a loss mitigation option, like a loan modification. (You can submit the application after the waiting period, too, if you don't do so earlier.) The 120-day period was designed to prevent the servicer from quickly beginning a foreclosure before the borrower even gets a chance to seek help. If you submit an application, the foreclosure is put on hold until:
(Get details about the federal law that provides time for borrowers to apply for an alternative to foreclosure in Federal Laws That Protect Homeowners During Foreclosure.)
Foreclosures in Kentucky are judicial in nature, which means that the foreclosure must go through the court system. After the lender files a complaint, the borrower gets 20 days to respond. If the borrower fails to do so, the lender will file a motion asking for a default judgment (an automatic win) from the court.
In many cases, the court will send the matter to the master commissioner, who is a court-appointed official, for a foreclosure recommendation. If the judge agrees with the recommendation and signs the default judgment, the lender wins the case.
By contrast, if the homeowner answers the lawsuit, the case proceeds to the litigation phase. The bank will likely file a motion asking the court to find for the lender (a summary judgment motion). Again, the commissioner will review the motion. If the commissioner recommends that the court should grant the motion, and the court agrees, the court will enter a judgment for the lender. The commissioner will then administer the foreclosure sale by preparing a notice of sale that is typically posted at or near the property, as well as published in a newspaper. Two appraisers will perform a drive-by inspection of the property.
Various states permit a borrower who is behind on mortgage payments to reinstate the mortgage (bring the account current) to stop an ongoing foreclosure.
Kentucky law, unfortunately, does not give most borrowers the right to reinstate before the foreclosure sale. Only those with a high-cost home loan get this opportunity. On the upside, many Kentucky mortgages give a certain amount of time—ordinarily until the court enters a judgment—for the borrower to reinstate the loan. If your mortgage contract doesn’t contain a reinstatement provision, your lender might agree to allow you to do so.
Some foreclosed homeowners in Kentucky get the chance to “redeem” the home by reimbursing the winning foreclosure bidder the sale price, plus interest and certain costs. If the home sells for less than two-thirds of the appraised value, the redemption period is six months after the sale.
If the foreclosure sale doesn’t generate sufficient income to pay off the mortgage debt, the remaining amount is called a deficiency balance. In Kentucky, the lender may get a judgment for the deficiency, but only if the borrower was personally served with the lawsuit or has made an appearance in the action.
The lender may then collect the amount owed after the sale by doing things such as garnishing your wages (taking money out of your paycheck) or levying your bank account (taking money out of the account.)
If you need help understanding the law, want to file an answer to the 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.