Tennessee is a non-judicial foreclosure state. That means that a lender can foreclose on a property in Tennessee without going to court. It also means that the foreclosure process can move very quickly compared with the process required in a judicial foreclosure state. 

Stages of Foreclosure

Mortgage Default in Tennessee

Though your mortgage loan is technically delinquent as soon as the due date passes without payment, being a few days late doesn’t have much practical effect. Most mortgage lenders offer a grace period, often as much as 15 days, during which there is no late fee. When the grace period expires, a late fee is typically added. But, a mortgage loan generally isn’t considered to be in default until the payment is 30 days past due. 

At that point, the lender or servicer will probably be calling often, and you may receive past-due notices.  But, it generally isn’t until the 90-day mark that a Tennessee homeowner receives a formal notice of default. After the notice of default, the process can move very quickly. This is the point at which the people whom I counsel are under to greatest amount of stress says Heather Banks, an attorney with Bond, Botes & Lawson, P.C. in Knoxville. But, Banks emphasizes, it is also the point at which we must work together quickly to come up with a game plan to stop the foreclosure and save the home. At Bond, Botes & Lawson, P.C., we encourage people to come in and see us as early in the foreclosure process as possible. The more time we have, the better chance we have of saving the home. 

Notice of Foreclosure Sale

The next step, the legal notice of foreclosure sale, may be initiated as soon as day 121, just about one month after the notice of default. In most cases, notice of foreclosure sale is accomplished by publishing notice of the sale in the newspaper three times and mailing a copy of the notice to the homeowner. The first publication and mailing of the notice must take place at least 20 days before the sale.  Even if the borrower does not receive the mailed notice of foreclosure, the foreclosure can take place with only the publication in a newspaper circulated in the county where the property is located. 

That means that if the bank or other mortgage lender moves promptly from one step to the next as soon as the law allows, the foreclosure sale could take place less than six months from the date of the first missed payment.

Exceptions and Special Circumstances

While the foreclosure process can move very quickly and there is no general right to reinstate the mortgage loan in Tennessee, some homeowners have additional options and tools at their disposal.

Reinstatement of High-Cost Home Loans

Though Tennessee law doesn’t provide a right to reinstate for everyone facing foreclosure, those with “high cost” loans enjoy some extra protection. A high cost loan is defined as having an annual percentage rate (“APR”) 8 percentage points over the Home Ownership Equity Protection Act’s (“HOEPA”) APR threshold for a first mortgage and 10 percentage points over the HOEPA APR for second mortgages.  One important protection is that a high-cost loan borrower may reinstate the loan by bringing all past-due payments plus any expenses that are actually incurred to preserve, maintain or protect the property or the lender’s

security interest, for instance, reasonable attorneys’ fees that the lender actually incurred, the reasonable cost for publishing the notice of an conducting the foreclosure sale.  The borrower has up until at least three business days prior to the scheduled foreclosure sale. 

Of course, this isn’t a solution for everyone, since it requires a significant payment. But, it does allow those with high-cost mortgage loans a bit of additional time to get payments caught up before the home is sold. 

Application for Loan Modification

Applying for a home loan modification is a separate process from foreclosure, but can have a significant impact on the timeline. That’s because the federal government has outlawed “dual tracking,” a process by which mortgage lenders used to accept loan modification and other loss mitigation applications but keep moving forward with foreclosure at the same time. 

Now, a loss mitigation application filed prior to the commencement of a foreclosure action–in Tennessee, that means the mailing or publishing of the first notice of foreclosure sale–the foreclosure can’t begin unless and until the application is resolved. “Resolved” may mean that the application was denied and the appeal period has expired, that the borrower opts not to accept any loss mitigation offered, or that the borrower doesn’t do something required to secure or maintain any loss mitigation option offered. 

Depending on the circumstances, a loss mitigation application may potentially add months to the foreclosure timeline, even if it is ultimately unsuccessful.

After a Tennessee Foreclosure

Though the timeline from missed payment to foreclosure sale may be very short, the foreclosure sale isn’t necessarily the end of the road in Tennessee. Both the former homeowner and the lender have rights they may exercise after the foreclosure sale.

Tennessee Right of Redemption

Unless waived in the by the borrower when obtaining the loan, in Tennessee, a person who has lost his or her home to foreclosure has a right to buy back the home. This is known as a redemption period, and the Tennessee redemption period is two years. That means that if the homeowner is able to secure the funds (or necessary credit) to purchase the property within two years, he or she can reclaim the home.  For practical purposes, most lenders have the borrower waive the right to redemption so this is not a valid option, so you should seek the advise of an attorney prior to the foreclosure actually taking place and bring your Trust Deed for review. 

Deficiency Judgments after Foreclosure

Often, a foreclosure sale does not yield enough to cover the outstanding balance on the loan plus costs of the sale. In 2018, AttomData reported that more than 14% of Tennessee homes with a mortgage were seriously underwater. “Seriously underwater” was defined as having an outstanding mortgage balance that was at least 125% of the value of the property. 

Under Tennessee law, a lender who doesn’t recover the outstanding balance of the loan plus its costs can sue the former homeowner to make up the difference. That may mean a judgment of tens of thousands of dollars. 

Bankruptcy and Foreclosure

If you’re facing foreclosure in Tennessee or have lost your home to foreclosure and are facing a deficiency judgment, it is in your best interest to speak with an experienced local bankruptcy attorney as soon as possible. For people who have regular income and can keep mortgage payments current but are unable to catch up past due payments quickly enough, Chapter 13 bankruptcy may offer a solution. 

On the other hand, those who want to get out from under overwhelming mortgage debt or have already lost their homes but are still on the hook for a remaining balance may be able to wipe the slate clean in Chapter 7.

You can learn more about your options by scheduling a free consultation with one of the experienced bankruptcy attorneys at Bond & Botes. Just call 877-581-3396 or fill out the contact form on this site.

Cynthia Lawson
Written by Cynthia Lawson

Cynthia T. Lawson is the Managing Partner of the Bond & Botes Law Offices location in Knoxville, Tennessee. She holds a Bachelor of Science from East Tennessee State University, and a Juris Doctorate from University of Memphis, Cecil C. Humphreys School of Law. She currently serves as a Mentor for the Moment in bankruptcy.Read her full bio here.

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