Under Nebraska foreclosure laws, a foreclosure 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 order to give them an opportunity to reinstate the loan by curing the default. If the property is residential, the borrower will have one month. If the property is used for farming, the borrower will have two months to reinstate.
Most Nebraska foreclosures are conducted out of court, and Nebraska borrowers may receive as few as two official nonjudicial foreclosure notices. A Nebraska nonjudicial foreclosure may take about 180 days, while a judicial foreclosure can take much longer since it must work its way through the courts.
The Nebraska pre-foreclosure process is the period of time during which the servicer must attempt to contact the borrower about delinquent loan payments and ways to avoid foreclosure and, ultimately, to convey information about a foreclosure sale date. However, most real estate investors consider pre-foreclosure to start when the homeowner first misses a mortgage payment since this is the beginning of the mortgage delinquency and also the time at which a homeowner may first begin to consider selling the property.
As in most other states, federal law discourages the initiation of foreclosure proceedings in Nebraska until the borrower has fallen 120 days past due on their mortgage loan payments. In the interim, lenders are encouraged to provide borrowers with loss mitigation options and foreclosure alternatives. State law does not require a lender to send letters to the borrower prior to beginning the foreclosure process, but the mortgage or deed of trust may require it.
The pre-foreclosure process begins when the trustee records a notice of default in the county recorder’s office. This gives the borrower one month to “cure” the default and reinstate the loan. The notice of default must also be mailed to anyone who previously filed a request for notice in the country records. Requests for notice are formal clauses in Nebraska deeds of trust that designate parties entitled to receive notice of default and notice of sale.
If the borrower fails to reinstate the loan, the trustee must publish a notice of sale in a newspaper once a week for five consecutive weeks. The trustee must also send a copy of the notice of sale to any parties who have filed notices for request. Once these notices are delivered, the property can be sold at the foreclosure sale.
Court foreclosures in Nebraska can take six months or longer, and mortgages (vs. deeds of trust) must be foreclosed in this manner. Once the lender has filed the appropriate court documents and delivered notice of those court documents to the borrower, the borrower has 30 days to respond. If the borrower does not respond, the court issues a foreclosure ruling and a 20-day redemption period begins during which the borrower may stop the foreclosure by paying off the amount owed or request a postponement, delaying the sale for up to nine months. If the borrower does not redeem or postpone, the property is scheduled for public sale.
For an out-of-court foreclosure, the notice of sale must be published once per week for five weeks. The final notice must be published 10 to 30 days before the sale date. The trustee conducts the sale. The property is sold to the winning bidder, and the trustee issues a deed transferring ownership.
In a court foreclosure, the notice of sale must be published once per week for four weeks. Either a court official called the master commissioner or the sheriff conducts the sale, and the property is sold to the winning bidder. Typically 2-3 weeks after the sale, a hearing is conducted to confirm the sale; this is the final chance a borrower has to redeem the property. After the sale has been confirmed, a deed is issued that transfers ownership to the winning bidder.
Interestingly, Nebraska courts may order part of a property to be sold rather than the entire property. These partial parcels are sold at foreclosure auctions, also referred to as sheriff’s sales.
Nebraska foreclosure laws do not permit redemption after sale if the property was foreclosed in a nonjudicial foreclosure. The buyer at the foreclosure sale will receive a trustee’s deed after the sale and the former owner cannot redeem the property once that deed has been recorded. However, the foreclosed homeowner does have the right to cure the default while the foreclosure suit is still pending and, furthermore, can delay an order of sale by up to nine months by filing a written request for delay.
If the foreclosure in question was nonjudicial, then Nebraska foreclosure laws permit lenders to seek a deficiency judgment. The foreclosing party must file the lawsuit for the deficiency judgment within three months of the foreclosure sale. Deficiency judgments must be the lesser value of the two following values:
1. The total remaining debt after subtracting the foreclosure sale price
2. The total remaining debt after subtracting the property’s fair market value (FMV) as of the foreclosure sale date.
So, for example, if a homeowner owed $150,000 on a home that sold for $100,000 and was valued at $120,000 at the time of the foreclosure sale, the deficiency judgment could not be for more than $20,000, since $20,000 (the difference between the sale price and FMV) is less than $50,000 (the difference between the sale price and the remaining debt on the property).
When a real estate investor successfully purchases a Nebraska foreclosure, they receive the trustee’s deed after the sale. At that point, the former homeowner cannot redeem the property. In most cases, at this point the investor would have the right to begin an eviction process if the foreclosed homeowner remained in the property. However, Nebraska, like many states, has enacted various foreclosure and eviction moratoriums in the past in response to financial and public health emergencies. National health and financial policy, such as the long-term eviction moratoriums implemented in response to the 2020 COVID-19 pandemic, may affect an investor’s ability to remove renters or residents, even foreclosed homeowners, from Nebraska foreclosures. Investors should explore current foreclosure and eviction policies prior to implementing eviction procedures.
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