Under Montana foreclosure laws, foreclosures can be judicial or nonjudicial. The foreclosing party – the lender holding the note on the home in most cases – must provide notice of the foreclosure to the borrower in addition to providing notices about loan payments in default.
Most Montana foreclosures are conducted out of court because it is easier and faster for the lender. However, Montana foreclosure laws are different from other states, so nonjudicial foreclosures may proceed in a slightly different manner in Montana than the one to which out-of-state investors may be accustomed. Specifically, the final stages of the foreclosure process are relatively speedy, but the pre-foreclosure process can be quite drawn out.
In Montana, foreclosures typically take about 150 days, but the pre-foreclosure process can be much longer. Montana’s Emergency Housing Assistance Program may provide up to $2,000 a month for homeowners experiencing financial hardship as a result of the 2020 COVID-19 global pandemic, and the Montana Small Tract Financing Act also applies to most residential foreclosures. This legislation requires extensive notice for borrowers prior to the foreclosure sale and, if the lender fails to abide by the rules set forth in this legislation, the foreclosure process may stall.
Investors should note the state of Montana has supported and, in some areas of the state, extended national eviction bans that prevent real estate investors and landlords from evicting tenants or residents of a property for nonpayment. This can affect pre-foreclosure and foreclosure timelines as well. Real estate investors must check foreclosure forbearance and eviction moratorium guidance in the state and locally when planning to buy Montana foreclosures.
As in most other states, federal law discourages the initiation of foreclosure proceedings in Montana until the borrower has fallen 120 days past due on their mortgage loan payments. Although this period of time is not officially part of the pre-foreclosure process, real estate investors should consider it an essential part of investment strategy because many homeowners in this stage feel they have entered “pre-foreclosure” and may be considering selling their properties.
When a Montana borrower misses a payment on their mortgage loan, the bank is required by law to work with borrowers to explore loss mitigation options and foreclosure alternatives. Once the borrower is 120 days delinquent, however, the lender will likely enter a notice of default and, subsequently, a notice of foreclosure, also referred to as a “Notice of Trustee’s Sale”. The notice must be published in a local newspaper at least 120 days before the trustee’s sale of the foreclosure. This part of the pre-foreclosure process is longer in Montana than in many other states, but once the Notice of Trustee’s Sale is published the process can move quickly. If the notice is published at least once a week for three successive weeks from the first publication, a homeowner may have only about 30 days from the date of the first publication to the foreclosure sale date.
An out-of-court foreclosure, or a nonjudicial foreclosure, which is most common in Montana, occurs when the terms of the mortgage or deed of trust allow the lender to sell the property if the borrower defaults. The lender starts the foreclosure process by filing a notice of sale with the county recorder. The sale must be at least 120 days after this notice is filed, but the lender is not required to mail a default notice to the borrower before filing the notice of sale unless the mortgage or deed of trust requires that.
At any time before the foreclosure sale, the borrower may satisfy the debt by paying the full default amount plus costs and attorneys’ fees incurred. This stops foreclosure proceedings.
Foreclosure sales in Montana are by public auction, with the property going to the highest bidder. The auction is between 9 a.m. and 4 p.m. on the sale date at the county courthouse or they may take place online. Many Montana foreclosure auctions were delayed in 2020 in response to the COVID-19 global pandemic. Investors must check with the local auction platform or venue to find out how to bid in Montana foreclosure auctions at this time. The winning bidder in a Montana foreclosure auction receives a deed transferring ownership and can take possession of the property after 10 days.
Montana foreclosure laws do not permit homeowners to redeem their properties after the foreclosure sale. However, the homeowner may redeem the property before the sale by paying off the outstanding balance of the loan along with late penalties and foreclosure fees or by negotiating a hardship repayment plan with the lender. Montana borrowers may also stall the foreclosure process indefinitely by declaring bankruptcy, which puts an automatic stay in place and allows the homeowner more time to find foreclosure alternatives.
Montana foreclosure laws do not permit lenders to seek deficiency judgments after the foreclosure sale. Even if the lender pursues a judicial (in-court) foreclosure in Montana, if the property is an occupied, single-family residence the lender cannot seek a deficiency judgment after the foreclosure.
When a real estate investor successfully purchases a Montana foreclosure, they must wait only 10 days before taking possession of the property. If the foreclosed homeowners are still in residence at that time, a real estate investor must start eviction procedures. However, Montana renters with bona fide leases (leases that are not month-to-month and whose signers are not directly related to the former homeowner) who are still in residence after that period of time may be entitled to 90 days’ notice prior to eviction or even to remain in the property for the duration of their lease.
Montana also has enacted various foreclosure and eviction moratoriums in the past in response to financial and public health emergencies. National health and financial policy may affect an investor’s ability to remove renters or residents, even foreclosed homeowners, from Montana foreclosures. Investors must explore current foreclosure and eviction policies prior to implementing eviction procedures.
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