“In Foreclosure”–What Does It Mean?

01 Dec “In Foreclosure”–What Does It Mean?

I frequently have clients tell me that their homes are “in foreclosure.” Upon reviewing the situation carefully, however, I find that the phrase “in foreclosure” may mean different things to different people, and it may be important to distinguish between those different meanings.

To me, as a lawyer in a judicial foreclosure state (where it takes a law suit to foreclose a mortgage) “in foreclosure” means that there is a law suit pending seeking to foreclose that mortgage. Papers have been filed, perhaps a hearing has been held, or a date set for an auction on the courthouse steps. The wheels have been set in motion, and there is a definite timetable for completion of the foreclosure action. To a lawyer in a non-judicial foreclosure state, that phrase may mean that the necessary notices have been given, and the process that will result in a foreclosure sale is pending.

To a lender, “in foreclosure” may not necessarily mean that there is a suit pending, or even that the non-judicial process of foreclosure has begun. It may mean only that the troubled loan has been referred to the department that handles such loans, or that it has been referred to an attorney for appropriate action. It may mean that action will be taken shortly (in Southern parlance, something is “fixin’ to happen”) or it may mean only that the people in charge of the account have changed. It may not be an important distinction in and of itself, but it can be important both in terms of the length of time you have to respond, and in terms of the costs that are being added to your loan. So, if you are talking to your lender and they tell you that the loan is “in foreclosure,” ask them specifically what that means, and what steps they have taken..

My clients also use the phrase “in foreclosure” to mean that they are behind in payments and are anticipating a foreclosure shortly, even if they haven’t gotten any formal notice of foreclosure and even if they haven’t been told of any pending action. Sometimes my clients think of it that way only because they think enough time has gone by that a foreclosure suit should be pending. Again, it helps to be accurate and specific, especially when talking to a lawyer. For example, if I know that a client has a foreclosure action pending, with a foreclosure sale in the immediate future, I am going to have to put other matters on hold to deal with that as an emergency, and I am going to have to charge fees accordingly. I am going to have to set aside sufficient time to handle the matter, or even decline the matter and send it to someone who has adequate time to devote to it. So, I not only need to know if there is a foreclosure suit pending, I also need to know if there is not. Like the Boy Scouts, this is one time it pays to be prepared.

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Däna (pronounced "Donna") Wilkinson, has been a bankruptcy lawyer in South Carolina for 20 years. She is certified as a bankruptcy specialist by the South Carolina Supreme Court.
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