Louisiana Foreclosure Law Firm
Louisiana law affords certain protections to secured creditors. When a lender provides financing for the purchase of a home or commercial real estate, the immovable property itself is always listed as security on the loan in an “Act of Mortgage”. This is vastly different from personal loans in which no collateral is offered. When the mortgage is recorded in the mortgage records for the parish in which the property is located, the secured creditor will hold a lien on the property. If a debtor defaults on the loan, the secured creditor has certain rights to foreclose on the property. Our creditors’ rights attorneys handle foreclosures for creditors across Louisiana.
Executory Process versus Ordinary Process
Louisiana law offers only judicial foreclosures for residential and commercial immovable property. This is unlike Louisiana repossession laws which provides both judicial and non-judicial options. This is also unlike some other states which have judicial and non-judicial foreclosure laws. The preferred route for creditors in Louisiana is the foreclosure by executory process in which the sheriff seizes the property and auctions it off at the courthouse.
Certain prerequisites must be met for executory process to be available though, and if not, a creditor must first file an ordinary proceeding and obtain a money judgment before enforcing that judgment against property of the debtor. For executory process to be available the promissory note must contain a “confession of judgment” which dispenses with the need for a trial because the defendant already recognizes the existence of the debt and confesses judgment against him or her if the debt is not paid.
When the executory proceeding is enforced against immovable property, the note must also be authentic form meaning it is executed in front of a notary public and two witnesses. If any of these requirements are not met, then a creditor must proceed via ordinary process.
The Louisiana laws for executory process are found at La. Code Civ. Proc. art. 2631 et. seq. After a creditor files a “Petition for Executory Process” the clerk will issue a demand for payment to the defendant. This demand is often waived in modern promissory notes, however. If waived, the clerk will immediately issue a “writ of seizure and sale” and the sheriff will then serve notice of the writ on the debtor. After the sheriff serves the debtor, at least two advertisements of the pending sale must be published in the newspaper.
The creditor must send Mennonite notices to each other lien hold on the property notifying them of the pending seizure and sale. The property must also be appraised, and ultimately must sell for at least two-thirds of the appraised value for the sale to go through. Otherwise, the sale is cancelled, and the property must be readvertised in advance of the new sale date. Appraisal can be waived in the promissory note, but if the foreclosure proceeds without appraisal the creditor gives up its right to pursue a deficiency judgment for any loan balance that remains due after credited for the net sale proceeds.
The Louisiana laws for seizing property via ordinary process are found at La. Code Civ. Proc. art. 2291 et. seq. As mentioned above, a creditor must first obtain a money judgment just as in any other collections suit and then wait for the suspensive appeal delays. It is also different in that a writ of seizure and sale under executory process attaches only to the property in question, whereas a “writ of fieri facias” under ordinary process attaches to general property of the debtor to satisfy the money judgment, subject to the exemptions from seizure outlined in La. R.S. 13:3881. The steps after the issuance of the writ are similar to a seizure under executory process with some subtle differences.
Defense Motions and Reconventional Demands
Debtors often employ delay tactics by filing defense motions alleging improper service or some other defect and ask the court for an injunction against the foreclosure. It is also common for debtors to file reconventional demands against the lender for things such as Fair Debt Collection Practices Act (FDCPA) violations. We are experienced at responding to and defeating these motions and counterclaims for our clients.
A common impediment to a foreclosure involves title defects. We work with our clients to cure title defects that will undoubtedly delay a foreclosure or resale of a property after it has been seized. Our creditors’ rights attorneys are capable of resolving these matters and are experienced at quiet title actions.
One of the most effective “defenses” to a foreclosure proceeding is filing a Chapter 13 bankruptcy petition. It will halt the foreclosure proceeding immediately. We work with our clients to protect their rights in bankruptcy court. We routinely file objections to confirmation of plans if the proposed plan treats our clients inadequately. We also file motions for relief from stay if a debtor fails to keep up with their bankruptcy payments.
Following a foreclosure, there are often times still occupants or tenants in the property. We handle post-foreclosure evictions for our clients when they are the one who buys the property at auction. When the prior owner is the occupant, the eviction process is simple generally only requiring a writ of possession after the deed is recorded.
If the occupant was a tenant, other rules apply. A bona fide tenant is a person who has entered into a lease with the foreclosed property owner at least 30 days prior to the foreclosure. The Protecting Tenants in Foreclosure Act (PTFA) sets forth special rules for evicting these types of occupants following a foreclosure. To avoid the delays set forth by the PTFA, creditors will often offer “cash for keys” to bona fide tenants and stipulate to a set move out date in exchange for a sum of money.
We work with our clients to pursue any deficiency balances owed on the loan after being credited with the net proceeds from the sheriff’s sale. Unless a debtor has a lot of equity in a property, there is usually still a balance owed on the loan following a foreclosure, especially if the property sold for the minimum two-thirds of the appraised value. Creditors have rights in Louisiana to pursue the debtor personally for the remaining deficiency balance.
Many debtors try to mitigate their losses prior to foreclosure proceedings are filed or sometimes shortly after. We work with our clients to assist in implementing whichever mitigation option they are exploring with their defaulted debtor. Loss mitigation is a process in which lenders work with borrowers to mitigate or resolve arrearages on mortgage payments. It is an alternative to foreclosure, which can be beneficial to offset the high costs of foreclosure for both creditors and debtors. The first step usually involves a debtor submitting a hardship package to the lender. From there the lender will analyze the debtor’s financial situation to determine what options are best.
Loan modification is a popular option. It is essentially a change in the terms of the loan which make it easier for the debtor to make his or her payments on time. It may involve a reduction in the interest rate, an extension of the length of time for repayment, a different type of loan, or some combination thereof. All of which is designed to lower the payment to make it easier to pay.
Similarly, in some situations a refinancing of the loan may be feasible. This involves a whole new loan rather than modifying the existing loan. A debtor would need to have enough equity in the property in order to cover the arrearages. The debtor would also need to be able to meet the loan qualifications of the lender. Both of these options permit the debtor to keep the home.
Another option is a deed in lieu of foreclosure. This involves transferring the title of a property from the debtor to the lender in exchange for forgiveness of the remaining debt. It’s essentially a sale of the property directly to the lender for the remaining loan balance. The lender can then sell the property to another party to recoup their investment while saving the costs of a foreclosure. The debtor gets the benefit of being able to walk away from the loan without the worry of a deficiency judgment.
Similarly, a short sale involves the debtor selling the property to a third party for an amount less than what is owed on the loan or what is owed toward all liens on the property. This happens when a debtor becomes “upside down” on the loan(s), often because a drop in the value of the property or because of subsequent liens on the property. However, at least some of the lienholders must agree to release their lien(s) on the property for an amount less than the full balance(s) owed. Each of these options result in the debtor losing the property, but without the threat of a deficiency judgment.
New Orleans Foreclosure Attorneys
Bowes, Petkovich & Palmer, LLC is a Gretna law firm that has served the New Orleans area since 1980. Our experienced creditors’ rights lawyers are well versed at handling foreclosures throughout Louisiana and pursuing deficiency judgments. We take pride in offering an effective and efficient experience. Call us today for a free consultation and find out why so many of our clients come back to us.