Under Pennsylvania (PA) foreclosure laws, foreclosures must take place in the court, meaning they are judicial. However, the state does have a fast-track foreclosure program designed to move abandoned homes through the foreclosure process quickly. In the fast-track program, a sheriff must order a foreclosure within 60 days of the foreclosing party proving the property is eligible for fast-track foreclosure. Otherwise, Pennsylvania foreclosures may take a year or longer, and the pre-foreclosure process can extend the overall timeline further.
Investors should be aware that Pennsylvania, like most states, may enact foreclosure and/or eviction moratoriums in response to public health threats or widespread financial crises. For example, in 2020, in response to the COVID-19 global pandemic, the state’s governor issued multiple eviction protection orders designed to prevent eviction of renters and homeowners during the first part of the year. Although these protections were allowed to expire prior to the end of 2020, the state did set up a program designed to provide mortgage relief for homeowners facing foreclosure as a result of the pandemic. Real estate investors must check all foreclosure forbearance and eviction moratorium guidance in the state and locally when planning to buy Pennsylvania foreclosures and prior to implementing eviction procedures.
The Pennsylvania pre-foreclosure process begins when the servicer attempts to contact the homeowner about delinquent loan payments and options for avoiding foreclosure. However, most real estate investors consider pre-foreclosure to start when a homeowner first misses a mortgage payment, since this is the beginning of the mortgage delinquency and frequently the time at which a homeowner begins to consider selling their property.
In Pennsylvania, as in most states, lenders are usually required to wait until payment is 120 days delinquent to begin the foreclosure process. If the homeowner applies for loss mitigation during this time period, the loan servicer cannot begin the official foreclosure process until the loss-mitigation period has expired, the homeowner has violated one of the terms of the loss-mitigation or loan-modification agreement, or the homeowner has been notified they are not eligible for loss mitigation.
The terms of most Pennsylvania mortgages require the lender to send a breach letter to the borrower when they fall behind on payments. If a homeowner does not respond to the breach letter, the lender may be able to accelerate the pre-foreclosure process in court. However, in addition to the breach letter, Pennsylvania foreclosure laws require foreclosing parties to send a notice of intent to foreclose at least 30 days prior to initiating the pre-foreclosure process. The notice is intended to allow homeowners a chance to cure their default, and lenders are required to provide information about what help is available to the homeowner, including the homeowner’s right to apply for Pennsylvania programs for homeowner assistance.
These notices must include specific information, including:
· Details of the default
· An itemized breakdown of past-due amounts
· Information about the borrower’s right to a face-to-face meeting with a local consumer credit counseling agency
If the borrower meets with an approved counseling agency, the lender cannot initiate the pre-foreclosure process until 30 days have passed since the meeting. Some Pennsylvania counties offer “foreclosure diversion programs” that may be mandatory, depending on the county. Check local government websites for more information on these programs.
Once all waiting periods have ended, the foreclosing party can pursue a lawsuit in court to foreclose. If they fail to do so and the case is allowed to lapse, the lender must begin the pre-foreclosure process again. The lender gives the borrower notice of the lawsuit by serving them with a summons and complaint. If the borrower does not respond, then the lender can request the court grant a default judgment and move forward with permission to hold the foreclosure sale. If the homeowner responds, the case must move through the court, although the foreclosing party may request the court grant a summary judgment if both parties agree on the critical facts of the case.
If the homeowner loses the lawsuit, the judge will order that the home be sold at a foreclosure sale. At least 30 days prior to the sale, the county sheriff gives notice of the sale by putting a handbill on the property as well as delivering a copy of the notice to the borrower. The sale is advertised at least once a week for three consecutive weeks in both a local general-interest newspaper and a local legal newspaper.
The sale is a public auction overseen by the county sheriff and takes place 1-2 months following the court’s order. The property is sold to the highest bidder and the sheriff completes the necessary documents to transfer ownership. The sale may be postponed once up to 100 days by announcement at the sale. The court must approve any further postponements. In some cases, the foreclosure sale may be conducted online. Check with local government offices to find out what type of platform will host the Pennsylvania foreclosure sale.
Winning bidders at Pennsylvania foreclosure sales must provide a 10 percent deposit on the final price of the property immediately following their win at the auction. The balance is due within 20 days, and the property will be re-listed for sale if the remainder is not paid.
Under Pennsylvania foreclosure laws, the homeowner facing foreclosure can reinstate the loan by paying off all late payments, fines, penalties, interest, and late fees, up to one hour before the bidding at the foreclosure sale begins. The homeowner can do this as many as three times in any 12-month span.
Pennsylvania foreclosure laws do not permit redemption of the property after the sale, but the terms of some mortgage notes do permit this. Check the terms of the loan on the property to find out if a homeowner’s loan requires a redemption period.
Pennsylvania foreclosure laws do permit deficiency judgments, but only under certain circumstances. If the lender wishes to seek a deficiency judgment, they must file for that judgment in a separate action within six months of the foreclosure sale. If the foreclosing party, usually the lender, was the purchaser of the property at the foreclosure sale, the deficiency suit cannot be for more than the property’s current fair market value (FMV).
After the Pennsylvania foreclosure sale, the new owner receives the deed to the property. Since there is no post-sale right of redemption in Pennsylvania, this happens as soon as the balance of the new owner’s bid is paid in full. In some cases, the new owner will find that the foreclosed homeowner has remained in the property after the sale. Pennsylvania foreclosure laws require new owners to file a separate eviction suit against the former owner of the property if they remain in the property after the foreclosure sale. In many cases, new owners may offer residents “cash for keys,” wherein the new owner provides residents with some amount of money in exchange for a smooth, timely exit. Real estate investors must remember that Pennsylvania foreclosure laws deal with tenants living in foreclosed homes and former homeowners differently and familiarize themselves with all aspects of Pennsylvania foreclosure laws before investing in a Pennsylvania foreclosure.
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