Foreclosure 101: What is Foreclosure, Anyway?

Most of us can’t afford to pay cash for real estate. When we buy real estate, we get a loan from a bank or other lender. The loan is secured, or protected for the lender, by collateral. In real estate, the loan is called a mortgage, and the collateral is the property itself. You can also get other loans with the property as collateral. If the borrower defaults, or fails to make payments on the loan, the creditor can legally require a sale of the collateral. Foreclosure is the process for a creditor with a claim (also called a lien) on real estate to force the sale of the real estate so the creditor can be payed from the proceeds of the sale.

The Foreclosure Process in Utah – a simplified overview

(By simplified, I mean that the explanation might not be entirely accurate, but is just a general overview. Consult an attorney to learn if it applies to your situation.)

In Utah, most foreclosures are non-judicial – the mortgage-holder (creditor) does not need to file a lawsuit in court to force the sale of property. Instead, the creditor has a deed of trust – a deed on the real estate that has to be recorded in the county recorder’s office.

1. Once there is a default, the ones who are foreclosing on the property (the foreclosing party) must record the default. Within 10 days, they need to send the notice to the homeowner.

2. Up to 3 months after the default is recorded, the loan can be reinstated, or put back into place as before. To do this, the borrower needs to work things out with the lender.

3. At least 3 months after the default is recorded, the foreclosing party must publish a notice of sale. This must be published at least 3 times, and the last time it is published needs to be at least 10 days before the date for selling the property. The notice also needs to be posted on the property 20 days prior to the sale.

4. Once all of these requirements are complete, assuming the loan is not reinstated, the creditor can proceed with the sale.

5. If the sale gives the creditor more than the borrower owes (including collection costs and fees), the extra must be paid back to the borrower.

6. If the sale gives the creditor less than the borrower owes (much more common with the state of the housing market), the creditor can file a separate lawsuit to collect the difference, also called the deficiency.