When a bank chooses to foreclose on a home in Utah, it can use one of two procedures—a “judicial” process that must go through the court system, or the “nonjudicial” option that doesn’t require court supervision. If you’re facing foreclosure in Utah, it will likely be nonjudicial in nature, because most lenders choose this cheaper, more efficient method. In this article, you’ll learn about foreclosure procedure in Utah, as well as rights that might help you keep your home.
(You can start with the basics in Foreclosure and Your Home: Understanding the Process, Your Rights, and Your Options.)
The Bank Must Wait 120 Days Before Starting the Foreclosure
Foreclosure is the method a lender uses to take back and sell your home if you fail to make the mortgage payment in accordance with the terms of your mortgage contract. However, federal law gives homeowners facing an impending foreclosure time to financially regroup before this can happen. Specifically, the lender can’t initiate the foreclosure until you are more than 120 days delinquent (past due) on your mortgage payment. The waiting period provides the homeowner with the time needed to apply for a loss mitigation program, such as a loan modification. Once the borrower submits an application, the foreclosure can’t proceed until it’s evaluated by the bank.
(For information about the federal law that provides a 120-day period before foreclosure, read Delaying Foreclosure: The Dodd-Frank Act 120-Day Rule.)
Judicial and Nonjudicial Foreclosure Procedure
In Utah, the bank can sell the borrower’s property using either a judicial or nonjudicial foreclosure method. Here’s a short description of each type.
Judicial foreclosure. With this type, the bank will hire an attorney and file a lawsuit against the borrower. If the borrower fails to respond within the given time limit, the bank will win and receive a “default judgment.” By contrast, the borrower can force the case into litigation by answering the suit. The case ends after the court evaluates the evidence and decides which side should prevail.
Nonjudicial foreclosure. A nonjudicial foreclosure begins when the bank starts the out-of-court procedures outlined in state law. Once the bank completes the procedures, the lender can sell the home at a foreclosure sale.
(Find out more distinguishing features between the two types of foreclosure in What Are the Differences Between Judicial and Nonjudicial Foreclosures?)
Utah Nonjudicial Foreclosure: The Steps
A nonjudicial foreclosure can only happen if there is a “power of sale” clause contained in the deed of trust or mortgage document that allows the bank to foreclose without going through the court system. Although the terms of the loan contract dictate the bank’s ability to conduct a nonjudicial foreclosure, Utah laws set forth what the bank must do to foreclose using this method.
Before the foreclosure, the bank or servicer (the company that processes mortgage payments) must mail a notice informing the borrower that it intends to file a notice of default (the initial step in a Utah nonjudicial foreclosure). The notice includes information about how to get foreclosure relief, such as a mortgage modification or other foreclosure alternative, and gives the borrower 30 days to get caught up on the loan.
If the borrower fails to bring the loan current, the bank can begin the nonjudicial foreclosure steps. The bank must provide two notices: a notice of default and a notice of sale.
Notice of default. The foreclosure officially starts when the trustee (the neutral person responsible for handling the foreclosure process) records the notice of default in the county recorder’s office. The trustee must also mail a copy to the borrower within ten days after recordation if the borrower filed a request for notice. (Most Utah deeds of trust include a request for notice as part of the loan terms.) The notice of default must be recorded at least three months before the trustee mails a notice of sale.
Notice of sale. After at least three months pass, and at least 20 days before the sale, the bank or trustee is required to mail a notice of sale to the borrower (if there was a request for notice). The notice of sale is also published in a newspaper and posted on the property.
Three-Month Reinstatement Period
If the borrower catches up by paying all missed payments, fees, and costs in one lump sum, the loan is “reinstated” and the foreclosure stops. In Utah, the borrower can reinstate the loan during the three-month period following the recording of the notice of default. The loan contract might give the borrower additional time to reinstate, too.
Deficiency Judgments: Owing Money After a Nonjudicial Foreclosure
After a foreclosure, the borrower might still owe money to the bank if the home sells for less than the amount the borrower owes. Under Utah law, the bank can get a deficiency judgment for the outstanding balance by filing a lawsuit within the three month period following the nonjudicial foreclosure sale—but the judgment can’t exceed the total mortgage debt (including interest, costs, and expenses of sale) minus the fair market value of the home.
If you find yourself facing a deficiency judgment that you’re unable to pay, you might be able to discharge the debt (wipe it out) in a Chapter 7 bankruptcy.
No Redemption Period After the Foreclosure Sale
Some states permit a foreclosed homeowner to “redeem” their house (buy it back) after a foreclosure sale. Utah law, however, does not allow for a redemption period following a nonjudicial foreclosure.
Locating Utah’s Foreclosure Laws
To find Utah’s nonjudicial foreclosure laws, go to the Utah Code (sections 57-1-19 through 57-1-34).
Questions for Your Attorney
- What should I do if I receive a Utah notice of default?
- Do I qualify for a foreclosure alternative, such as a mortgage modification?
- Will I be evicted if I refuse to leave after the foreclosure sale?