In Puerto Rico—and all 50 states—a bank cannot start foreclosing on a home until the borrower is more than 120 days late paying the mortgage. The 120-day period gives a borrower time to try to save the home by getting caught up or working out another alternative. In this article, you’ll find out about the Puerto Rico foreclosure process, as well as homeowner rights that might help you keep your house.
(Learn additional information about general foreclosure procedures in Foreclosure and Your Home: Understanding the Process, Your Rights, and Your Options.)
120-Day Foreclosure Waiting Period
Under federal law, the mortgage servicer (the company that handles your loan account on behalf of the owner of the loan) can’t start foreclosing until the borrower is over 120 days delinquent. The waiting period gives the borrower time to submit a “loss mitigation” (foreclosure alternative) application to the servicer. If the application is successful, the borrower will be able to save the home.
If the borrower submits a complete loss mitigation package to the servicer during the 120-day period, the foreclosure cannot start until the completion of the evaluation process. If the borrower receives a foreclosure alternative (such as a loan modification) but fails to comply with the terms, the foreclosure can move forward.
(To learn more about the federal 120-day rule, read Delaying Foreclosure: The Dodd-Frank Act 120-Day Rule.)
Puerto Rico’s Pre-Foreclosure Notice Requirement
Under Puerto Rico law, the lender must give the borrower at least 20 days to get caught up on any missed payments (cure the default) before starting the foreclosure process. The 20-day period begins when the lender sends a notice to the borrower. The bank can mail the notice during the 120-day loss mitigation period so that the foreclosure can begin after the federal waiting period expires (if the homeowner doesn’t cure the default).
Judicial Foreclosure in Puerto Rico
A Puerto Rico foreclosure starts when the lender files a brief (a legal document that explains the bank’s position) with the court, along with other required documents. The court will review the filing. If it satisfies all legal requirements, the court will instruct the marshal to serve the borrower with a demand for payment and a summons to come to court. The demand will give the borrower 30 days to pay the amount due and reinstate the loan (reinstatement lets the borrower resume making monthly payments).
The borrower also gets 20 days to object to the foreclosure. If the borrower fails to file an objection and doesn’t reinstate the loan, the court will order the home sold at an auction.
Following the auction, the court has ten days to determine whether the lender followed all foreclosure procedures correctly. The court will confirm the sale after a proper foreclosure.
You Can’t Buy Back a Home in Puerto Rico
Several states give a foreclosed homeowner time to recover a home after an auction. The borrower must reimburse the purchaser for the price paid at the sale or pay off the unpaid mortgage debt, including fees and costs. Puerto Rico law, however, doesn’t give the borrower a redemption period after the foreclosure sale.
You Might Owe Money After the Foreclosure
If the bank sells the home at auction for less than the total mortgage debt owed (including foreclosure fees and costs), the remaining balance is called a “deficiency balance.” For example, if the mortgage debt were $200,000 and the home sold for $175,000, the deficiency balance would be $25,000. In Puerto Rico, the lender can get a personal judgment (a “deficiency judgment”) against the borrower for the deficiency balance. The bank can collect the judgment amount using collection techniques, such as garnishing the foreclosed homeowner’s wages and taking money out of a bank account.
(Many people can wipe out a deficiency judgment in a Chapter 7 bankruptcy.)
Finding Puerto Rico’s Foreclosure Laws
To review Puerto Rico’s foreclosure laws, go to the Laws of Puerto Rico (Title 30). To learn more about homeowner rights in Puerto Rico or get help with interpreting the statutes, you should consult an attorney.
Questions for Your Attorney
- What should I do after the foreclosure starts if I want to keep my home?
- Am I eligible for a foreclosure alternative, such as a loan modification?
- When will I have to leave the foreclosed home?