In Tennessee, the bank can foreclose by filing a lawsuit in court or by following a series of legal steps that don’t involve the court system (a “nonjudicial” foreclosure). In most cases, if you go through a foreclosure in Tennessee, the process will be nonjudicial. Once officially started, a nonjudicial foreclosure can move quickly. (To learn when and why the bank might choose to foreclose through court instead, see Why Would a Lender Choose a Judicial Foreclosure Instead of a Nonjudicial Foreclosure?)
In this article, you’ll get information about how a typical nonjudicial foreclosure in Tennessee works, as well as learn about your legal rights under federal and state law, which might help you keep your home. (To learn what to do—and what not do—if you’re facing a foreclosure, see Foreclosure Do’s and Don’ts.)
Various federal laws provide homeowners with specific protections both before and during the foreclosure process. For instance, the servicer usually can’t start the foreclosure process until you're more than 120 days delinquent on payments. Also, the servicer has to give you information on ways to avoid foreclosure. Specifically, the servicer must attempt to contact you by phone no later than 36 days after you fail to make a payment—and in writing no later than 45 days after missing a payment—to discuss options that might resolve the problem. (12 C.F.R. § 1024.41). (To learn more about federal laws that protect homeowners who’re facing a foreclosure, see Federal Laws Protecting Homeowners: Foreclosure Protections.)
In Tennessee, most residential foreclosures are nonjudicial under a power of sale in a deed of trust. The bank has to either publish notice of the foreclosure sale in a newspaper at least 20 days before sale or post notice in several public places 30 days before the sale (if there isn’t a newspaper in the county). (Tenn. Code Ann. §§ 35-5-101 to 35-5-103). The bank also has to mail you a copy of the notice of sale on or before the first publication. (Tenn. Code Ann. § 35-5-101). Then the bank holds a foreclosure sale.
While state law doesn’t give foreclosed homeowners a right to reinstate in a nonjudicial foreclosure, the terms of many deeds of trust allow for it. If you want to complete a reinstatement, check your loan documents to find out whether you get this right and the deadline to do so.
Some states have a law that allows a foreclosed homeowner to “redeem” (buy back) the home after the foreclosure sale. Under Tennessee law, you get two years after a nonjudicial foreclosure to redeem the property unless the mortgage or deed of trust that you signed when taking out the loan waives the right of redemption. (Tenn. Code Ann. §§ 66-8-101 through 66-8-103).
Tennessee mortgages and deeds of trust generally contain a waiver of the statutory right of redemption, so check your loan documents to find out if you have the right to redeem.
If the total mortgage debt is more than the foreclosure sale price, the difference is called a “deficiency.” Some states allow the lender to get a personal judgment—called a deficiency judgment—against the borrower for this amount.
Tennessee law permits the foreclosing bank to file a lawsuit after the nonjudicial foreclosure to get a deficiency judgment. The deficiency amount may be limited to the difference between property’s fair market value (FMV) at the time of the sale and the outstanding debt if the borrower shows that the sale price was materially less than the FMV. (Tenn. Code Ann. § 35-5-118). (For a summary of the deficiency law in Tennessee, see Deficiency Judgments After Foreclosure in Tennessee.)
You can read Tennessee’s foreclosure laws for yourself in the Tennessee Code (§§ 35-5-101 to 35-5-118 and 66-8-101 through 66-8-114). To learn how to look up foreclosure laws, see How to Find the Foreclosure Laws in Your State.
If you think the foreclosing bank or servicer violated the law or you want to find out about different ways to fight a foreclosure, consider contacting a local foreclosure attorney.