The Foreclosure Process in Maryland
A mortgage lender may contemplate a foreclosure action in Maryland immediately upon the borrower’s default pursuant to the terms of the mortgage.
1) Notice of Intent to Foreclose
However, a lender may not actually file a foreclosure action until at least 90 days after the initial default and 45 days after sending the borrower a letter notifying him or her of the lender’s intention to pursue foreclosure if the default is not cured. The lender may thereafter file a foreclosure action at any time it chooses, and the timing of an action is entirely unpredictable.
2) Order to Docket
The foreclosure action comes in the form of an Order to Docket and is filed by Substitute Trustees, who are attorneys hired by the lenders to process the foreclosure. The trustees will send a copy of the Order to Docket to the borrower. It will be an unmistakable large packet of papers that contains a copy of the Deed of Trust along with a number of required notices and affidavits. Receiving an Order to Docket in Maryland constitutes notice that there is now an active foreclosure action in that county’s Circuit Court.
The most immediately important document contained in the packet will relate to foreclosure mediation. If it contains a Preliminary Loss Mitigation Affidavit, the substitute trustee must eventually file a final loss mitigation affidavit with the Court at least thirty days prior to a scheduled sale date. The Final Loss Mitigation Affidavit, whenever it comes, will be accompanied by a Request for Mediation form. To try to avoid foreclosure through mediation, the borrower must fill out this form and file it with the Court within twenty-five days of receiving it. The foreclosure process is paused pending the outcome of the mediation. If there is no successful outcome of the mediation, the foreclosure process will proceed. (Click Here for more information about Foreclosure Mediation in Maryland.)
4) Sale Date
At this point, with the borrower still in default and mediation either having been waived or unsuccessful, the lender or substitute trustee may at any point elect to schedule a sale date. Notice of this sale date must be published for three consecutive weeks immediately preceding the sale. Notice of the sale date must also be mailed to the borrower and owner of the property by first-class mail and certified mail.
Prior to a sale date a borrower may take various steps to try to stop the foreclosure sale. For example, a borrower may pursue a loan modification from the lender, which may be enough to postpone a sale even if the modification is under review. A borrower may file bankruptcy, which automatically (but temporarily) halts foreclosure activity. A borrower may even request a stay of the sale through the Court based on an impropriety in the trustee’s conduct of the foreclosure action.
5) After the Sale
Following the foreclosure sale, the foreclosure purchaser may not immediately take possession of the property. The borrower still has a scintilla of interest in the property until the Court ratifies the sale at the trustee’s request, which may not happen until at least thirty days following the sale. With this remaining interest the borrower has the right to file exceptions to the sale, in which he or she may allege that grounds exist for invalidating the sale judicially. Recent case law in Maryland has limited exceptions to specific instances of fraud, illegality or irregularity on the part of the trustee in relation to the foreclosure sale itself, for example failing to send a notice of the sale date to the borrower.
Once the sale is ratified, all remaining rights of the borrower are extinguished. However, even at this point the purchaser may not simply take possession. The right to possess the property must be judicially awarded. The purchaser may either make a motion for possession in the foreclosure action or file a separate eviction proceeding, and if successful the result of either will be a sheriff scheduling and overseeing an eviction.
After ratification, rather than waiting for eviction the former homeowner may call the trustee and inquire about “Cash for Keys.” As a way of avoiding the costs of eviction and ensuring the property is left in good condition, a lender will often pay the former homeowner to leave by a certain date. For example, the lender might offer several thousand dollars to vacate the property within three weeks and leave it in “broom swept” condition.
7) Continuing Liability
A common misconception is that following a foreclosure, all of the borrower’s debt obligations associated with the property are satisfied. However, just because a property is gone does not mean that all liability is gone as well. In recent years most foreclosed properties have been sold at foreclosure for less than the amount necessary to pay off the first or second mortgages. Following a foreclosure sale a borrower remains personally liable to any lienholder whose lien amount is not fully satisfied from the sale’s proceeds. The unsatisfied lienholder may seek to collect what is now an unsecured debt, and the borrower may negotiate this amount or seek to discharge it through Chapter 7 bankruptcy.
Regardless of which stage of the foreclosure process you may be in, the best thing you can do is be informed about the process and about what courses of action you are still able to take to protect your home and your family. If you have additional questions about the foreclosure process we invite you to contact us and Attorney Sandy Chang as soon as possible for a consultation.