Depending on the state and whether the process is judicial or nonjudicial, a foreclosure might drag on for several months or even years. If the borrower moves out of the home before the foreclosure ends, the mortgage servicing industry commonly calls this type of property "abandoned." Abandoned homes quickly fall into disrepair. Often, the lawn turns brown, while the pool turns green, and general maintenance goes undone. Vacant homes also attract vandals, squatters, and criminals. These things all reduce the property's value, which hurts the borrower, the bank, and the neighborhood. Here's how:
How abandoning your home hurts you (the borrower). Suppose the property's condition significantly deteriorates after you move out and the home sells at a foreclosure sale for less than you owe on the mortgage. You might have to pay a considerable deficiency judgment, depending on state law. The lower the value of the home, the higher the potential deficiency judgment. Your mortgage debt will also likely grow as the servicer takes steps to preserve the lender's interest in the property.
How an abandoned home hurts the bank. The bank could lose a lot of money because a house in disrepair brings in less money at a foreclosure sale, or when it's resold after becoming REO, than a well-maintained one. If you live in a state that prohibits deficiency judgments after a foreclosure sale, the bank won't be able to recoup the lost money.
How abandoned homes hurt neighborhoods. A vacant property drags down both the value of the home itself and the entire neighborhood.
To speed up the foreclosure process for abandoned properties, some states have enacted fast-track foreclosure laws. A fast-track foreclosure process allows the bank to get title to the home quicker so it can sell the property to a new owner sooner—before the place loses substantial value. In the end, in most cases, a fast-track foreclosure can benefit the borrower, the bank, and the community.
But fast-track foreclosures are only beneficial when the home is actually empty. Unfortunately, though, banks sometimes pursue fast-track foreclosures without having clear evidence of abandonment. If you still live in your home, a fast-track foreclosure can be a big problem because it means you'll lose your home much quicker than usual. A swift foreclosure deprives you of valuable time to work out an alternative, like a loan modification or the opportunity to simply live in the home without making payments.
How Fast-Track Foreclosures Work
Around a dozen states, including Florida, Illinois, Maryland, New Jersey, Pennsylvania, and others, have enacted fast-track foreclosure laws for vacant and abandoned properties. If the home meets the legal definition of "abandoned" under state law, the bank may use a special process that allows it to foreclose much faster than it otherwise could under the state's regular foreclosure laws.
While the process is different in each state that has a fast-track foreclosure law, here's how the process generally works:
The bank files a motion with the court when it starts the foreclosure, or sometime afterward, that states the home is vacant and is at risk of harm due to the abandonment. The bank usually must provide some evidence that the home shows signs of abandonment, like the property's doors or windows are broken, unclaimed mail and newspapers are accumulating around the home, or utilities (like gas, electricity, and water) aren't turned on or being used.
The bank then must give the borrower written notice that it asked a court to declare the property abandoned. Usually, the bank may serve the notice personally, by mail, and by posting it on the property.
Sometimes the sheriff or another party has to visit the property and determine the vacancy status.
Then, the court generally holds a hearing to decide whether the borrower has abandoned the home.
Most of the time, the foreclosure sale happens shortly after a court deems the home as abandoned. Once approved for a fast-track foreclosure, the foreclosure typically takes only a few months instead of, perhaps, years. To find out if your state has a fast-track foreclosure law and, if so, how it works, talk to a local foreclosure attorney.
Downside to Fast-Track Foreclosure Laws: When the Borrower Still Lives in the Home
If you live in a state with a fast-track foreclosure law and receive notice that the bank is trying to speed up the foreclosure—but you still live in the home—you'll likely have to take certain actions to halt the expedited process.
Meet all deadlines. To challenge a fast-track foreclosure, you might have to submit written evidence or objections to the court within a specific amount of time, generally before a hearing.
Attend a hearing. Before a court allows the bank to go forward with a fast-track foreclosure, it might hold a hearing to determine if you abandoned the home. If you don't attend the hearing, the court will likely declare the property abandoned and allow the bank to fast track the foreclosure. But if you go to the hearing and prove to the court that you still live in the house, you won't lose it to an expedited foreclosure.
Give the court proper evidence that you didn't abandon the home. To stop a fast-track foreclosure, you'll have to prove that you still live in the home. Generally, you'll have to present evidence of non-abandonment, like the fact that you receive mail at the address, the utilities are in your name, and you have personal belongings in the home.
Make sure your home looks lived in. Again, courts generally consider certain conditions as signs of an abandoned home. So, to avoid a fast-track foreclosure, be sure to fix any broken windows, take care of the lawn, clean up any accumulated newspapers or trash on the property, and don't disconnect the gas, electrical, or water services.
Also, don't give the bank other evidence that you plan to abandon the home, like a letter or a phone call in which you state that you're leaving or thinking about moving out of the property.
Talk to a Lawyer
In most cases, you won't get a lot of time to fight a fast-track foreclosure. If you want to find out if your state has a fast-track foreclosure law—or if you receive notice that the bank is improperly trying to speed up a foreclosure in your case—consider talking to a foreclosure attorney right away. If you want to learn about different ways to avoid a foreclosure, contact a HUD-approved housing counselor as well.