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Maine.gov > PFR Home > Consumer Credit Home Page > Consumer Information > Foreclosure Resources > What is foreclosure?

FORECLOSURE

What is foreclosure?

Foreclosure involves a lawsuit in which a bank, a mortgage company, or other lien holder seeks to take an owner's property to satisfy a debt. The bank or lender may actually take ownership of the property or have the property sold to pay off the debt. As a result of the foreclosure, the owner loses whatever rights he or she had in the property.

Examples: If a homeowner fails to pay his or her mortgage loan on time, the lender that holds the mortgage on the house can bring a foreclosure action against the homeowner. Similarly, if a homeowner borrows money from a bank using a house as collateral (security) and fails to pay, the homeowner can lose the house to the bank in a foreclosure action.

Foreclosure is a court process, and you must follow the process carefully to protect your rights.

The Process

Before a foreclosure can begin, a lender must deliver a notice of default to the borrower. If the borrower does not pay the full amount in default plus interest and fees within 35 days, the lender may start the foreclosure process by filing the appropriate documents in court.

If you fail to pay the defaulted balance or fail to contact your lender and work out a new plan, your lender may initiate a foreclosure lawsuit by having you served with a Summons and Complaint.

In order to defend in a foreclosure, you will need to pay close attention to court proceedings and deadlines. There are certain terms you need to know and steps you need to take.

The plaintiff (the bank, lender or other lien holder) starts a foreclosure lawsuit by having the borrower served with a summons and complaint.

In the upper right hand corner of the Summonsis a date. It is called the return date. The return date is not a hearing date, and you do not have to go to court on that date. It is a reference point for when papers must be filed with the court. YOU MUST KNOW THE RETURN DATE TO FIGURE OUT THE DEADLINES FOR FILING PAPERS.

The Complaintwill state the plaintiff's (bank or lender) position in the case, such as that the plaintiff wants the foreclosure to satisfy a debt that has not been paid.

Filing an Answer

The first thing you should do is file a written Answer.  An Answer is a simple form that tells the court that you are not ignoring the foreclosure.  Once you file the Answer you will get notice of whatever is happening in court.  To make it easy for you to respond and to request court-supervised mediation, a new Maine law requires that the lender provide you an Answer form for you to fill out and return in the envelope included. Read the attached paperwork, then complete and mail this form to the court.  Each homeowner who wants to respond to the foreclosure action or to request mediation needs to sign their own response and request.  You can attach additional sheets to the response if the form does not give you enough space.  You do not need to use this form to respond to the foreclosure action or to request mediation; rather, you can use your own form if you want.

IMPORTANT:  If you fail to file an Answer within 20 days, you will lose your home as a default judgment will be issued against you.

If necessary you can file an Answer without a lawyer. (draft sample Answer)

If a judgment is entered against you, the only way you can keep your property is if you exercise your "right of redemption". This means that you can keep your home if you pay back the full amount of the mortgage loan, plus legal costs and fees (not just the payment arrears). The right of redemption exists for 90 days immediately following the entry of the judgment. You have the right to remain in your home during the 90 day redemption period.

If you do not "redeem" the property within the redemption period, you will not own the property any more. When the redemption period ends, you can be evicted by the lender in a very short time frame (48 hours) and there will likely be no further court hearings before this happens. The lender is entitled to possession of the property regardless of how much, or little, you still owe; the season of the year; or any other reason.

Notice of Sale /Auction

If the borrower does not stop the foreclosure during the pre-foreclosure period, the lender will hold a public sale of the property; first, the lender publishes a notice of sale for three weeks in a local newspaper. The sale is scheduled 30-45 days after the first publication date. The notice must contain the property description and the date, time, and location of the sale.

The sale is often at the office of the foreclosure attorney, who also runs the sale. Sales may also take place at the courthouse or the property. The sale may be postponed for no more than seven days at a time and the postponement will be announced at the originally scheduled sale. At the sale, the lender may bid on the property. The property is sold to the highest bidder. Usually bidders are required to bring a certain deposit amount (stipulated in the notice of sale) and may pay off the balance within 30 days. After the sale and payment of the balance, the lender transfers the property ownership to the winning bidder.

After receiving the money from the sale, the lender will pay off the mortgage loan balance. Any remaining sales proceeds will be paid to any other lien holders or to you, as the court will instruct the lender. If, however, the sale price is less than the amount owed to the lender, the lender may be able to hold you responsible for the difference.

Last Updated: June 23, 2009