Can I be evicted after a foreclosure?
The short answer to this question is yes, but the reality is that it is much more complicated than you might think. Foreclosures typically take much longer than evictions, but may similarly require individuals to vacate the property.
Foreclosures take longer because they must follow the legal process required for a bank or other lending institution to take the property that secured the mortgage. The most common reason that property is foreclosed upon is that the homeowner has stopped paying the mortgage.
In most states, foreclosure is a process that requires the court to find that the bank or other lending institution has the right to foreclose and take your home. That process can take a significant amount of time.
Some states also permit non-judicial foreclosure, which does not involve the court. It is a much faster process that homeowners often have to consent to as part of getting the loan.
What is a redemption period?
Once a foreclosure is finalized, some states also provide homeowners with the right to a redemption period. A redemption period is a period of time during a foreclosure where you, the homeowner, can keep your property by paying off your debt.
During the redemption period, you can continue to live in the house or the house can continue to be occupied. In most cases, if you can come up with the funds to pay off your mortgage during the redemption period, then you can stop the foreclosure and keep the house.
Foreclosure laws vary by state, and not all states have redemption periods. The redemption period can be long. In some regions, it is a year or more. Some states also permit you to waive your right to a redemption period, which many banks will regularly ask you to do as part of your loan application process.
The redemption period is a protection for homeowners. However, if you do not have a redemption period or the redemption period expires and you cannot pay off the mortgage, you can be evicted from your home.
When can I be evicted from a home I own?
You can only be evicted when you have no legal right to be in a home. As a homeowner, this only happens if you have been foreclosed upon and have no redemption period, or if you have a redemption period that has run out and you have been unable to pay off the total mortgage. The bank or lending institution can only evict you from your home after the foreclosure is finalized and your redemption period has run out.
When can I be evicted from a home I rent?
As a tenant, the eviction process is much faster. Sometimes an eviction can happen within just a few weeks. You may be evicted if you violate the terms of your lease or if your lease has expired and does not renew automatically. Renters do not have as many rights as homeowners, but there are some protections through the eviction process.
What if I rent and my landlord is behind on their mortgage?
If you are a tenant and your landlord is behind on payments, they could lose their property to the bank or other lender. Your landlord's foreclosure could affect whether you can continue to live in your apartment or rental house. As a tenant, you may want to ask a lawyer about your rights in this situation, as they will vary from state to state.
How do I pay rent or the mortgage after a foreclosure?
Paying the mortgage after a foreclosure
As a homeowner, you might still need to make your mortgage payment, even after your lender goes through the foreclosure process. There are generally two reasons that this might be the case:
- You want to stay in your home, and you want to renegotiate your mortgage payments or pay off your prior lender.
- You owe a deficiency judgment because you were underwater on your mortgage.
Being underwater means that you owe more on your home than it is worth. If your home is sold to a third party, and that sale does not cover the full amount of your mortgage, you might still owe the bank money for a house that you no longer own. These payments are called deficiency payments.
Paying the rent after a foreclosure
If you are a tenant and your landlord is being foreclosed upon, you might still need to keep up with your rental obligations. In some cases, you will receive notice of a new landlord that will step into the shoes of your old landlord. You will simply keep making the same payments in those situations, but they will likely go to another person or entity.
In other cases, you may be asked to leave your house or apartment after a foreclosure. They still have to give you proper notice and time to leave. Specifically, the Protecting Tenants at Foreclosure Act (PTFA) sets out that tenants must be given at least 90 days to leave a property that is being foreclosed upon. If your rental period is longer than 90 days, you might also be able to stay the full term of your lease. Keep in mind that you have options to assert your rights if you believe that the eviction you are facing is illegal.
Of course, if you leave the rented property, you will no longer have any rental obligations.
How is my credit impacted by a foreclosure or eviction?
Your credit will be negatively impacted by a foreclosure or eviction.
A foreclosure may be worse for your credit compared to an eviction. While a foreclosure may take a month or more to appear on your credit report, keep in mind that foreclosure is usually the result of missed mortgage payments. Each missed mortgage payment, as well as other missed payments, will likely harm your credit. By the time the foreclosure occurs, your credit score will have already likely dropped significantly.
Missing rent payments or an eviction may not have a direct impact on your credit, unless:
- You are evicted and a court orders you to pay money.
- Your debt is sold to a collections agency.
- Your landlord reports the missed payments to a credit reporting agency.
You may also want to keep in mind that a rental history report, which is not the same as your credit report, will show any evictions you have had in the past. That means that a new landlord may not be willing to rent to you if they see an eviction on your rental history report, regardless of how good your credit may be.
How is my lease agreement impacted by a landlord's foreclosure or bankruptcy?
The Protecting Tenants at Foreclosure Act (PTFA) protects tenants who live in properties that are being foreclosed upon. You should have at least 90 days to leave your property, but it can be up to the full term of your lease if you still have more than 90 days on your lease. In many cases, your lease protects you from having to leave right away.
If your landlord files for bankruptcy, then they might be trying to prevent foreclosure on the property where you live. In that situation, you might need to change where you make your payments, but your lease should still remain effective. Ultimately, communicating with your landlord is very important in this scenario, but you may want to confirm what they tell you with your own lawyer.
You might eventually need to enter a Lease Amendment with the property's new owner, whether that is a bank or third party. In many cases, you can simply amend the lease to state who owns the property now and where rent payments should be sent without changing other lease terms.
Both evictions and foreclosures can be very daunting because they are complicated and affect your home. To learn more about your rights and options if you are facing eviction or foreclosure, reach out to a Rocket Lawyer On Call® attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.