Our firm handles foreclosures for lenders as well as opposes foreclosures when there is the possibility of fraud or failure of the lender to follow statutory requirements.
STATUTE OF LIMITATIONS
The general statute of limitations in Mississippi is three years [Miss. Code Ann. § 15-1-49]. Actions to enforce negotiable notes and demand notes are subject to a six-year statute of limitations [Miss. Code Ann. § 75-3-118]. Actions to recover a deficiency must be commenced within one year of the foreclosure sale date [Miss. Code Ann. § 15-1-23].
DOCUMENTS NEEDED TO START FORECLOSURE
Copies of the mortgage or deed of trust, note, assignments and substitutions of trustee, itemization of account balance and arrearage are essential. If the holder of the deed of trust is operating under a power of attorney or trust agreement, recorded copies of these documents should also be provided. Copies of title policies and surveys are not usually required, but may be helpful in resolving any title issues.
In Mississippi, a foreclosure may be accomplished either judicially or under the “power of sale” provided for in the deed of trust. [Miss. Code Ann. 89-1-55 (1972)] Although the vast majority of foreclosures are conducted under a power of sale, judicial foreclosures remain as a viable alternative in situations that require reformation of the deed of trust, or where unusual circumstances dictate that suit be filed to terminate any equitable rights of redemption of the mortgagor.
Unusual circumstances aside, foreclosures generally rely upon the contractual provisions of the deed of trust as well as legislation implementing the non-judicial power of sale set forth in these deeds of trust. Mississippi deeds of trust typically designate three parties: the “Grantor” (or mortgagor), the “Trustee,” and the “Beneficiary” (or mortgagee). Although the trustee is vested with many powers and functions, including the right to cancel the deed of trust upon satisfaction thereof, his function is generally limited to that of initiating and conducting the foreclosure process. Upon conclusion of the foreclosure sale, the trustee then conveys title to the property to the highest and best bidder at the sale. A typical power-of-sale foreclosure should require less than 115 days from referral to conclusion.
POST-SALE/CONVEYANCE AFTER FORECLOSURE
A trustee’s or substituted trustee’s deed is used to convey title after foreclosure.
Deeds-in-lieu of foreclosure are an option but, in most cases, save little if any time from what would be involved in a typical power of sale foreclosure. A deed-in-lieu may be an attractive alternative, if a title problem exists with the deed of trust, and the mortgagors otherwise hold clear title to the property. In the absence of some particular circumstance that makes the deed-in-lieu a more expedient remedy, power of sale foreclosures are often preferred. The deed of trust may already be insured under an existing title policy, and problems associated with liens attaching subsequent to the deed of trust are avoided by foreclosure. CAUTION: If you are the holder (lender) of the deed of trust, do not take a deed-in-lieu if there are any liens or judgments against the present title holder as these do not go away with a deed-in-lieu.
Unfortunately, in Mississippi, the only notice requirements, in addition to the notice provided by advertisement for sale, are those which may be provided for contractually in the deed of trust or those which may be imposed by the insurer, or guarantor of the loan, or that which may be required to be given the beneficiaries of federal liens or may be required under the provisions of the Fair Debt Collection Practices Act (FDCPA). If you hold a second deed of trust, the foreclosing first deed of trust holder has no requirement to notify you. When the first deed of trust holder forecloses, you lose your interest in the property. The same goes for liens and judgments. You will not get a notice and your lien or judgment is wiped out with the foreclosure. It is customary, however, not required, to provide the mortgagors with notice of default at least 30 days prior to the sale date. If a bankruptcy order containing “drop-dead” relief has been entered, the order may also require that notice of default be given to the debtor and his attorney.
SUBSTITUTION OF TRUSTEE
Although it is permissible for someone other than the trustee to conduct the foreclosure sale as agent of the trustee designated in the deed of trust, the preferred procedure is to appoint the person selected to conduct the foreclosure as substituted trustee, if he or she is someone other than the trustee named in the deed of trust.
This approach allows the substituted trustee to exercise all powers conferred upon the original trustee, including the authority to execute the necessary conveyance to the successful bidder at the foreclosure sale. In order to be valid, the appointment of trustee must be properly executed and recorded on the land records prior to commencement of the advertisement for sale. Mere filing is not sufficient; instead the instrument must be recorded and “spread at large” on the land records of the proper county.
The trustee’s (or substitute trustee’s) notice of sale must be advertised for three, consecutive weeks in the county where the property to be foreclosed is located. This involves publishing the notice of sale in a newspaper with general circulation in the proper county on the same day of each week for at least three weeks. If only three publications are used, the sale date must be exactly one week from the date of the last publication. If four publications are used, the sale may be held on any day (except a Sunday or legal holiday) within one week from the date of the last publication. In addition, the notice of sale must be posted at the courthouse of the proper county (and judicial district if the county involved has more than one judicial district) beginning the same day publication begins on the notice of sale. The notice of sale must designate the original mortgagors, trustee, beneficiary and otherwise describe the deed of trust. It should also set forth any assignments and substitutions of trustee, including the dates of the various instruments and the book and page recording references. The notice must accurately describe the property to be sold and the terms of the sale, i.e., for cash to the highest and best bidder. In addition, the notice should specify the place of sale (i.e. the door of the courthouse where the sale will be held) and should indicate the time of the sale (i.e. during legal hours between 11 A.M. to 4 P.M). If you want to bid on the property, you should call the foreclosing attorney in advance and make an appointment for you to be at the Courthouse to bid as there is a five hour window for calling the foreclosure and the foreclosing attorney can go to the Courthouse anytime during this period.
REINSTATEMENT AND REDEMPTION
An account in foreclosure may be reinstated and the foreclosure stopped at any time prior to conclusion of the sale at the courthouse, provided all past-due payments, late charges, expenses of sale, attorneys’ fees, and trustee’s fees are paid in full, in cash or certified funds. [Miss. Code Ann. 89-1-59 (1972)] After the sale is concluded, the sale is final, and no statutory post-sale right of redemption exists for the benefit of the mortgagor (debtor).
CONDUCT OF SALE AND ADJOURNMENT
If you intend to bid on a property, We recommend that you have an experienced real estate Attorney check the title to the property and advise you if there are any liens that cannot be removed by the foreclosure that you will be stuck with if you buy at the Courthouse. Many foreclosure lenders will not have paid the taxes up to date and will not pro-rate the current year taxes. Another suggestion is that you work out something with the foreclosing entity to buy the property after the Courthouse sale (usually no one shows up to bid) at a negotiated price below the amount that you would have to pay at the Courthouse. This way you will have an opportunity to go through a complete closing with a title search, pro-rated taxes, title insurance, etc.
The foreclosure sale may be conducted at any time between the hours of 11 A.M. and 4 P.M. on the date advertised for the sale, unless the parties to the deed of trust contracted for more restrictive hours.
The sale is held at the door of the courthouse designated in the notice of sale; however, the trustee or substituted trustee may adjourn the sale from day-to-day, if he wishes to do so, by announcement to those present at the time and place specified for the original sale as to the time and place (which must likewise comply with statutory and contractual requirements) of the adjourned sale to be held the following day. Foreclosure sales may not be held on Saturdays and legal holidays.
Ordinarily, the trustee reads the notice of sale, and then calls for bids from the company present at the sale. The mortgagee may bid up to the amount of its total indebtedness without tendering any funds at the sale. Other bidders must be prepared to tender funds in a form satisfactory to the trustee (ordinarily cash or certified funds) at the sale. If the highest bidder (other than the mortgagee) fails to later deliver sufficient funds, the property may not be conveyed automatically to the second highest bidder, but instead, the sale must be re-advertised.
After the sale has been successfully concluded, the trustee or substituted trustee executes and delivers to the highest bidder a trustee’s or substituted trustee’s deed conveying his interest in the property arising out of the foreclosure sale. Ordinarily, this deed together with a proof of publication of the notice of sale is filed with the chancery clerk of the appropriate county immediately after the conclusion of the sale.
If a surplus results from the sale (if the proceeds exceed the mortgagee’s total indebtedness, fees and expenses), the excess would be distributed by the trustee in order of priority to any junior lien holders with the mortgagor to take anything remaining upon satisfaction of all junior lienors of record. If there are any senior deeds of trust, they are usually not entitled to receive the surplus or any part thereof.
Both HUD and VA require owner’s title insurance policies to be issued on foreclosed property insured or guaranteed by them. HUD-insured loans should name the Secretary of Housing and Urban Development as insured, and VA-guaranteed loans should be issued in the name of the Secretary of Veterans’ Affairs. Usually, the amount of the title policy is the principal balance of the loan; however, in some instances, HUD may require the policy be issued for a slightly greater amount.
There are no significant statutory exclusions on either payoffs or reinstatements. The amounts must be allowable under the terms of the documents. Unless the fees or costs are expressed in the documents as a set amount or percentage, they must be reasonable and customary.
While it is possible to maintain a single action in Chancery Court to accomplish a judicial foreclosure and to recover judgment for any deficiency remaining after a sale of the property, it is ordinarily more expedient to first conduct a power-of-sale foreclosure.
After the sale is concluded, a separate action may be brought to recover the deficiency between the total indebtedness secured by the deed of trust and the proceeds resulting from the foreclosure sale, provided the bid amount meets certain standards of reasonableness. Ordinarily, a deficiency suit would be filed in circuit or county court in the county of residence of the obligors under the provisions of the deed of trust note. It is imperative, however, that any action seeking a deficiency be filed within one year of the sale date; otherwise recovery would be forever barred by the statute of limitations. Upon filing suit, the defendants are permitted 30 days from the date of service of process within which to answer the complaint. If no answer is filed within the allotted time, the lender is entitled to recover judgment for the amount sought.
If a mortgagee intends to enter a bid at a foreclosure which would create a deficiency, if accepted as the highest bid, care should be exercised to insure that the bid amount will pass judicial standards of reasonableness. Based upon decisions of the Mississippi Supreme Court, most mortgagees specify bid amounts of 51 percent or more of the property’s fair value.
In Wansley v. First National Bank of Vicksburg, 566 So. 2d 1218 (Miss. 1990), the Mississippi Supreme Court held that every aspect of the foreclosure sale must be “commercially reasonable.” This standard applies not only to the sufficiency of the bid amount, but also to the method of advertising and conducting the sale, as well as the time, place and terms of the sale.