Understanding the foreclosure process in Oklahoma is vital to avoiding your credit being destroyed and your home taken by the bank. If you DO understand the ins and outs of the foreclosure process, you can avoid it, leverage other solutions, and possibly either save your home altogether or sell it without foreclosure to make some money out of the deal.
Before we dive in…
What is foreclosure exactly?
Foreclosure is the legal process that lenders or banks have to go through in order to take back a house they lent money on. Foreclosure is used when the borrower stops making payments in most cases. The agreement you sign with your bank when they give you money to buy a house has some other rules besides just missing payments that, if broken, can result in foreclosure also. The #1 cause for foreclosure, though, is falling behind on mortgage payments.
Oklahoma’s foreclosure process is utilized by any lender who owns a collateralized mortgage loan. All lenders must adhere to the guidelines of the Uniform Mortgage Foreclosure Act (UMFA) in regards to the procedures and requirements for foreclosing on a home or property in Oklahoma, among other states. The Uniform Mortgage Foreclosure Act (UMFA) is a comprehensive set of rules that governs the foreclosure process.
Oklahoma foreclosures can be very confusing to those who are unfamiliar with their state’s laws and procedures. Denying foreclosure, or delaying it for months on end, requires an in-depth understanding of how Oklahoma law defines the various types of mortgage loans and the foreclosure process itself.
The following sections have been developed to guide consumers through Oklahoma’s foreclosure laws and help them avoid the many pitfalls that can occur in a home or property foreclosure from start to finish.
Definitions of Foreclosure
It is vital to be knowledgeable about how mortgage loans are defined by law, as this will be the foundation for understanding the foreclosure process in Oklahoma. The Uniform Mortgage Foreclosure Act (UMFA) has established specific terms to describe different types of mortgage loans and how they will be affected by the foreclosure process.
The following definitions have been compiled from the UMFA and are critical in defining what a foreclosure actually is, as well as understanding which process will be used for a particular type of loan.
- A mortgage is a contract whereby the lender promises to deliver money to the borrower if he or she fulfils certain obligations.
a) Promissory Note – A promissory note is defined as the written promise, signed by both parties, that action will be taken by the borrower and that a certain amount of money is owed to the lender. This note contains all terms which are to be met by both parties in order for them to fulfil their contractual obligations.
b) Deed – A deed grants ownership of real property (i.e. homes, automobiles, etc.) when it is sold. It is what the borrower will receive from the lender in return for creating a promissory note that obligates him or her to pay back the money owed at an agreed-upon time.
c) Mortgage – A mortgage is defined as a conditional conveyance (deed) of real property from one party to another when it is made with the condition that the property will be repossessed if any payments are not made on the promissory note.
d) Deed of Trust – A deed of trust is defined as a mortgage loan where the lender holds legal title to the real property until all obligations have been met, at which time ownership is transferred to the borrower. In a deed of trust, the beneficiary is usually a financial institution and does not always include the legal titleholder (lender).
e) Deed in Lieu – A deed in lieu is given by the borrower to avoid foreclosure and repossession of his or her home. This type of note or contract is given when the borrower is unable to meet the terms of his or her original promissory note and will grant an extension on payments in exchange for the deed to the property.
- As a rule, a foreclosure occurs when a lender takes possession of real property from which it has been guaranteed against loss by mortgage or trust deed. The means used in the foreclosure process is also defined in the UMFA as follows:
a) Legal – When a lender takes possession of his or her property through legal action and without using any physical force on the borrower or real property. This type of foreclosure will require that legal documentation is filed with the court and proves to the judge that foreclosing is both necessary and in the best interest of the lender.
b) Physical – When a financial institution repossesses real property without any legal proceeding or knowledge from either party. This type of foreclosure will occur when there has been an abandonment of the home by its owner (either voluntary or involuntary) and/or if physical force is used against the owner or his property. It is important to note that this type of foreclosure will require no court hearing and that all real estate transactions will proceed according to normal legal procedures (usually regulated by the county clerk).
- The most common foreclosures in Oklahoma occur either through a judicial foreclosure or a non-judicial foreclosure process. Both types of foreclosure imply different amounts of time between the two parties involved and can differ greatly in the amount of time it takes for a foreclosure to actually occur.
a) Judicial: judicial foreclosures are defined as those that will be heard by a judge during a court hearing.
b) Non-Judicial: non-judicial foreclosures are those that can take place outside of a courtroom and does not require any hearing by a judge or trustee (as is required in cases of judicial proceedings).
In either case (judicial or non-judicial), foreclosures are usually enforced by statutes or court orders and will depend upon the type of property involved and what is owed to whom.
The Basic Stages of Foreclosure
There are a few stages that are common to any foreclosure process. Those stages depend on what state you are in because each state uses 1 of 2 ways to foreclose on homes. The two ways states use to foreclose upon a property are: judicial sale or power of sale. In Oklahoma most foreclosures are judicial but a few are through a power of sale.
Connect with us by calling 405-673-4901 or through our contact page to have us walk you through the specific foreclosure process used here in Oklahoma so you know what to do.
In Oklahoma, foreclosure typically doesn’t go to court until you have missed 3-6 months of payments. Usually (but not always), a lender or bank will mail you a few notices that your payments are late. If you are behind on payments and your bank is about to start foreclosure or hasn’t yet taken your house back, you are in pre-foreclosure. During this time, which can last 2-12 months, you can A) pay the missing payments, B) refinance the loan with your bank under special terms, C) sell the house to pay off the mortgage, D) sell the house for less than what is owed and wipe out the mortgage, AKA a short sale.
Here is how each type of foreclosure works…
Under Judicial Foreclosure:
- You get behind on payments for 1-6 months.
- You’ll get a letter from the court demanding payment immediately and informing you of what is to come if you don’t (foreclosure)
- If you fail to pay, the bank files a court case against you for foreclosure and serves you notice of default explaining this.
- You’ll have 30 days to respond to the lawsuit and either accept the foreclosure or deny it. You can still make it go away by selling the house or paying the late payments.
- If you don’t pay the missed payments or sell the house, a judgment will be entered by the courts and the bank can request the power to sell your home to recoup their money. This is usually done through an auction and sold to highest bidder.
- Once the property is sold, the sheriff comes to serve you an eviction notice and forces you to immediately vacate the property. Locks are changed, the house is secured, and everything is done.
Under Power of Sale (or Non Judicial Foreclosure):
- The bank serves you with papers demanding payment, and the courts are not required to be used – although the process MAY be subject to judicial review by the courts.
- After the established and usually short grace period has elapsed for you to repay the debt, a deed of trust is drawn up and control of your property is transferred to a trustee (the bank or their attorney).
- The trustee can then sell your property to get their money back on the house.
What Happens After A Foreclosure Auction?
After a foreclosure auction is complete, your home is sold at auction, and the loan amount is paid off with the sale proceeds from the auction. Sometimes, if the bank doesn’t get enough money from the auction to pay off the loan, a deficiency judgment can be issued against the borrower. This is where understanding the foreclosure process in Oklahoma is key. Just because the bank took your house and sold it doesn’t mean they stop there….
A deficiency judgement is where the bank sues you in court for any portion of the loan that is unpaid after your house is foreclosed on and sold by the bank. They basically come after you for the rest of the debt in any way they can when selling the house isn’t enough. Depending on the details, they can take a cut of your paycheck or get into your bank account if the courts allow it.
Some states limit the amount owed in a deficiency judgment to the fair value of the property at the time of sale, while other states will allow the full loan amount to be assessed against the borrower.
Here’s a good website that shows the state by state deficiency judgement laws because each state is different.
Notice of default OKCAs, you know, it’s best to just avoid foreclosure and auction and deficient judgement altogether. Instead, call up the bank to try and work with them (short sale or refinance) OR work with a real estate company like us to help you either sell the house as is, take over payments (including catching you up on payments), or to help you negotiate with the bank to sell at a price for less than what is owed and wipe the debt clean completely (no deficiency judgement).
If you need to sell a property fast near Oklahoma City, we can help you.
We buy houses in Oklahoma City, facing foreclosure all the time. We know how it works. Don’t wrestle with understanding the foreclosure process in Oklahoma. Call us today.