If you’re behind on your mortgage payment, and you live in Alaska, keep an eye on your mailbox, or you might not even be aware that your home is in foreclosure. In Alaska, most foreclosures take place outside of the court system with a third party called a "trustee" handling the entire process. Although the trustee is required to publish a public foreclosure sale notice, in most cases, the only notice that the homeowner gets personally is a mailing from the trustee. In this article, you’ll find out more about foreclosure proceedings in Alaska.
(For a foreclosure overview, read Foreclosure and Your Home: Understanding the Process, Your Rights, and Your Options.)
When the Lender Can Start the Foreclosure
After you stop making your monthly mortgage payments, the owner of your loan (the original lender or a subsequent purchaser of the loan) or mortgage servicer (the company that collects your monthly payment for the loan owner) cannot simply remove you from your home. The lender or servicer must take certain legal steps in a process called foreclosure before selling the property to pay off your mortgage debt.
In some states, the lender can complete the foreclosure process in just a few months. In the past, this meant that the homeowner didn't have much time to bounce back from financial setbacks, such as an injury or job loss, before losing the house. In 2014, a law went into effect that gives owners more time to work out a way to avoid foreclosure. The law forces the lender to wait until a house payment is more than 120 days overdue before beginning the state foreclosure process. After the loan is delinquent for over 120 days, the bank can proceed with a foreclosure under state law.
(Find out more about the federal law that slows down foreclosures in Delaying Foreclosure: The Dodd-Frank Act 120-Day Rule.) [LINK]
Foreclosure Process in Alaska
In Alaska, a lender can choose between a judicial or nonjudicial foreclosure. Most foreclosing lenders prefer to use the faster, less expensive nonjudicial process because it doesn’t require the bank to go through the court and get approval from a judge. Here is a brief rundown of how both types work.
Judicial foreclosure process. Judicial foreclosures begin when the lender initiates a lawsuit in court. If the homeowner doesn’t respond to the lawsuit by filing an answer, the bank automatically wins and receives a “default judgment.” On the other hand, if the homeowner decides to challenge the foreclosure, the case moves into the “discovery” phase wherein the lender and homeowner can ask for evidence from the other party. The court then reviews the evidence and decides the case. If the bank prevails, the judge will enter a judgment against the homeowner. The judgment is the legal document that gives the lender the right to sell the home at a foreclosure sale.
Nonjudicial foreclosure process. Nonjudicial foreclosures do not go through the court. Instead, the bank takes various out-of-court steps described in the state's laws (discussed further below). After completing those steps, the lender sells the property at a foreclosure sale.
(Learn more about the two types of foreclosures in the article What Are the Differences Between Judicial and Nonjudicial Foreclosures?)
Nonjudicial Foreclosure Procedures in Alaska
In an Alaska nonjudicial foreclosure, the lender itself cannot foreclose on the property. Instead, the bank must use a third party (called a trustee) to administer the foreclosure.
Notice of default. The trustee begins the foreclosure by recording a document called a notice of default in the appropriate recording district no less than 30 days after the borrower defaults (the “default” is not making the payment) and not less than 90 days before the sale.
The trustee then mails a copy of the notice of default to the borrower within ten days after recording it. (The trustee could choose to hand-deliver a copy of the notice of default to the borrower within 20 days after recording it, but in most cases, the notice is sent through the mail.)
Notice of the foreclosure sale. The trustee must post a sale notice in three public places at least 30 days before the sale, publish the notice of sale in a newspaper for four weeks, and publish the notice on a website at least 45 days before the sale date.
Reinstating Your Loan Before the Foreclosure Sale
In most cases, Alaska law allows the homeowner to stop a nonjudicial foreclosure sale by “reinstating” the loan (bringing the account current) at any time before the date of the sale. If, however, the trustee filed two or more previous notices of default, and you reinstated each time, the trustee can refuse to let you reinstate again.
Fortunately, Alaska law doesn’t allow a lender to get a deficiency judgment against a foreclosed homeowner after a nonjudicial foreclosure. What is a deficiency judgment? When a home sells at a foreclosure sale, but the sale price is not sufficient to cover the outstanding debt, the difference is called a deficiency. In some states, the lender can sue the foreclosed owner in a separate lawsuit for the deficiency amount. If the creditor obtains a judgment, it can collect the amount through a bank levy (taking money out of a bank account), a wage garnishment (deducting funds from your paycheck), or some other collection technique.
Right of Redemption After the Foreclosure Sale
Some states have a law that allows a foreclosed homeowner to “redeem” the home (get it back) by paying the new owner the full amount he or she paid for the property at the foreclosure sale. In Alaska, however, you cannot redeem the home after a nonjudicial foreclosure unless the deed of trust (the loan contract that you signed when you took out the loan) provides for a right of redemption. Most deeds of trust in Alaska do not give the homeowner the right to redeem after the foreclosure sale.
If you are unsure whether your lender followed all Alaska’s foreclosure laws, you should contact a local attorney. You can find Alaska’s foreclosure laws in the Alaska Statutes sections 34.20.070 to 34.20.100
Questions for Your Attorney
- Did my lender follow all of Alaska’s foreclosure laws?
- Are there any grounds to fight the foreclosure?
- What can the lender do if I don’t leave my house after the foreclosure sale?