Before the foreclosure crisis, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor foreclosing lenders. However, many federal and state laws now give protections to borrowers. Servicers generally must provide borrowers with loss mitigation opportunities, account for each foreclosure step, and carefully comply with foreclosure laws.
Also, most people who take out a loan to buy a residential property in Louisiana sign a promissory note and mortgage. These documents usually give homeowners certain contractual rights after a mortgage loan default.
So, don't get caught off guard if you're a homeowner behind in mortgage payments. Learn about foreclosure laws in Louisiana and how the Louisiana foreclosure process works, from missing your first payment to a foreclosure sale.
In a Louisiana foreclosure, you'll most likely get the right to:
Once you understand the Louisiana foreclosure process and your rights, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.
The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale happens as "preforeclosure," too.)
During the preforeclosure period, the servicer can charge you various fees. Also, in most cases, federal law requires the servicer to let you know how to avoid foreclosure, and most mortgage contracts require the service to send you a breach letter.
Under federal law, the servicer usually can't officially begin a foreclosure until you're more than 120 days past due on payments, subject to a few exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners ample opportunity to submit a loss mitigation application to the servicer.
If you default on your mortgage payments for your home in Louisiana, the foreclosure will be either:
An executory proceeding, like a judicial foreclosure, goes through court—but it's a faster process. So executory proceedings are the most common type of foreclosure in Louisiana.
While most residential foreclosures in Louisiana go through the executory process, here are the procedures for both kinds of foreclosures.
Again, most foreclosures in Louisiana are completed in an executory proceeding. After the lender files a "petition" and supporting evidence, the court summarily orders the property seized and sold. What gives the lender the right to conduct this streamlined foreclosure process? You probably consented to this kind of foreclosure when you signed your loan documents.
Most Louisiana mortgages include language that entitles the lender to a "confession of judgment" (a foreclosure judgment) if you don't make payments on the loan. Basically, you agreed in the mortgage contract that the lender would automatically win its foreclosure case if you default.
A confession of judgment lets the lender avoid a lengthy litigation process. Because you've already consented to this process, the lender simply files its foreclosure petition along with certain documentation, like a copy of the mortgage, and a court orders your home seized and sold. (La. Code Civ. Proc. Ann. Arts. 2634, 2638).
After the court orders the sale by issuing a writ of seizure and sale, the sheriff can seize (take) the property and sell it to a new owner. The sheriff will serve you the notice of seizure—which must include the time, date, and place of the sheriff's sale—by personal service or domiciliary service. (La. Code Civ. Proc. Ann. art. 2721). (Domiciliary service is when the server leaves the documents at your home with a person of suitable age and discretion who resides in the property.) In the case of seizure of residential property, the notice of seizure must include information about the availability of housing counseling services.
If the sheriff's sale is to be conducted through an online auction, the notice of seizure, or a subsequent notice served upon the judgment debtor at least three days before the sale, must state that the sheriff's sale will be conducted through an online auction, specify the date of the online auction and the time when bidding is scheduled to open, and identify the electronic address of the platform through which bids can be entered. (La. Code Civ. Proc. Ann. Arts. 2721, La. Code Civ. Proc. Ann. art. 2293(B)(1)).
The initial sheriff's sale date can't be scheduled any earlier than 60 days from the date the court signed the order allowing the foreclosure. (La. Rev. Stat. § 13:3852). The sheriff also publishes notice about the sale at least twice but must wait three days, not including holidays, after serving the notice of seizure before doing so. (La. Code Civ. Proc. Ann. Arts. 2722, 2331).
To challenge this kind of foreclosure, you'll have to appeal the foreclosure or apply for an injunction to stop it. If you think you have a defense to the foreclosure, you should talk to a foreclosure lawyer as soon as possible.
The lender starts a judicial foreclosure by filing a civil lawsuit against the borrower who defaulted on the mortgage. A judicial foreclosure is sometimes called an "ordinary" proceeding in Louisiana. (La. Code Civ. Proc. Ann. Art. 3722).
If you don't file an answer to the suit, the suit, the lender will ask the court for, and probably receive, a default judgment, which will allow it to hold a foreclosure sale. But if you choose to defend the foreclosure lawsuit, the case will go through the litigation process. The lender might ask for summary judgment. A summary judgment motion asks that the court grant judgment in favor of the lender because there's no dispute about the critical aspects of the case.
If the court grants summary judgment for the lender—or you lose at trial—the judge will enter a judgment and order your home sold at auction.
At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less.
In some states, including Louisiana, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower. If the lender is the highest bidder, the property becomes "Real Estate Owned" (REO).
But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds (that is, money over and above what's needed to pay off all the liens on your property), you're entitled to that surplus money.
A few potential ways to stop a foreclosure and keep your home include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. Working out a loss mitigation option, like a loan modification, will also stop a foreclosure.
Or you might be able to work out a short sale or deed in lieu of foreclosure and avoid foreclosure. (But you'll have to give up your home with a short sale or deed in lieu of foreclosure transaction.)
Louisiana law doesn't give the borrower the right to reinstate the loan. But your loan paperwork might allow for reinstatement. Check your mortgage to see if you get the right to complete a reinstatement. If not, the lender might agree to let you reinstate your loan.
One way to stop a foreclosure is by "redeeming" the property. To redeem, you must pay off the full loan amount before the foreclosure sale. Under Louisiana law, you can prevent the sale by paying the sheriff the amount of the judgment with interest and costs. (La. Code Civ. Proc. Ann. Arts. 2340, 2724).
Some states also provide foreclosed borrowers a redemption period after the foreclosure sale, during which they can buy back the home. Louisiana law, however, doesn't provide a post-sale redemption period.
If you're facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy.
Once you file for bankruptcy, something called an "automatic stay" goes into effect. The stay functions as an injunction that prohibits the lender from foreclosing on your home or otherwise trying to collect its debt, at least temporarily.
In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out about the options available to you, speak with a local bankruptcy attorney.
The federal Servicemembers Civil Relief Act (SCRA) provides legal protections to military personnel who are in danger of foreclosure. While the SCRA generally protects military servicemembers against default judgments in judicial foreclosures, the Fifth U.S. Circuit Court of Appeals in Louisiana determined that the protection against default judgments doesn't apply if the foreclosing lender is enforcing a "confession of judgment" clause in a mortgage. (See Fodge et al. v. Trustmark National Bank et al., 945 F.3d 880 (5th Cir. 2019)).
In a 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 $400,000, but the home sells for $350,000 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. Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrower.
Deficiency judgments are generally allowed in Louisiana
In Louisiana, the lender can get a deficiency judgment by filing a separate lawsuit after the executory proceeding or by converting an executory foreclosure to a regular judicial foreclosure. (La. Code Civ. Proc. Ann. Art. 2772). But the court won't issue a deficiency judgment unless the lender appraised the property before the sale in accordance with Louisiana law. (La. Code Civ. Proc. Ann. Arts. 2771, 2723, La. Rev. Stat. § 13:4106).
In an ordinary foreclosure proceeding, the deficiency judgment is obtained as part of that action.
For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Get tips on what to do—and what not to do—if you're facing a foreclosure.
Find out if foreclosures are on the rise.
If you have questions about Louisiana's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney. Talking to a HUD-approved housing counselor about different loss mitigation options is also a good idea.