Under Louisiana foreclosure laws, only judicial foreclosures are permitted. However, there are two types of judicial foreclosure in Louisiana: executory and ordinary. Louisiana foreclosures can take from 180 to 270 days, depending on whether the foreclosure is ordinary or executory and whether the homeowner contests the foreclosure. Executory foreclosures are technically judicial foreclosures but permit lenders to avoid many of the steps typically considered part of a judicial foreclosure. Ordinary judicial foreclosures follow the conventional timeline in which a lender sues a homeowner for mortgage loan delinquency and, ultimately, proves their case and is awarded a foreclosure judgment by the court. The ordinary process is more extensive and costly, and it works more like a lawsuit. This foreclosure process usually lasts about nine months. Most Louisiana foreclosures are executory in nature.
The Louisiana Pre-Foreclosure Process
As in most other states, federal law discourages the initiation of foreclosure proceedings in Louisiana until the borrower has fallen 120 days past due on their mortgage loan payments. Although this period of time is not officially part of the pre-foreclosure process, real estate investors should consider it an essential part of investment strategy because many homeowners in this stage feel they have entered “pre-foreclosure” and may be considering selling their properties.
When a Louisiana homeowner misses a payment on their home loan, the servicer has the option to extend a “grace period” during which the borrower may simply make the missed payment without incurring fees, fines, or penalties. In most cases, this period is about 15 days, but Louisiana foreclosure law does not set a definite length.
Lenders are required by federal loan servicing laws to contact the homeowner by phone or in person to discuss foreclosure alternatives and loss mitigation options no more than 36 days after each payment is missed. No more than 45 days after each payment is missed, the servicer must provide information about these options in writing and assign an individual to the case. Many Louisiana home loans also include provisions requiring lenders to send a “breach letter” to the borrower letting them know that they will face foreclosure if the debt remains unpaid and that the lender may have the option to accelerate the foreclosure if the delinquency goes unaddressed.
If a borrower has agreed in the terms of their loan that the lender may obtain a judgment “on default,” also called a “confession of judgment,” then the lender may file a foreclosure petition in court after pursuing all requisite pre-foreclosure actions. The lender attaches the mortgage to the foreclosure petition in order to have the court order the property seized and then sold. Homeowners can stall or halt this process by appealing the petition or bringing suit against the lender.
More details on executory foreclosures:
The executory process involves the lender using a mortgage that includes an “authentic act that imparts a confession of judgment” in which the borrower accepts the obligations under the mortgage. The lender is not required by state law to send any notification to the borrower before beginning the foreclosure process; however, the deed of trust or mortgage may include such a requirement. Either way, once the petition is filed, the borrower is served with a demand for the default amount. If the borrower does not provide the amount within three days, the court orders a writ of seizure and sale, and the clerk delivers it to the sheriff. The sheriff delivers the writ of seizure to the borrower. Louisiana foreclosure laws require the notice of seizure to include information about avoiding foreclosure, availability of free housing counseling, and the time, date, and location of the sheriff’s sale. The initial sale date cannot be sooner than 60 days from the date that the court signed the foreclosure order.
Once the sheriff serves the writ of seizure, they also must publish the notice of sale. The sale is a public auction, and the notice of sale must be published at least twice in a newspaper in the parish where the property is located. The sheriff conducts the sale, and anyone may bid including the borrower. The winning bidder must pay the sale price in cash on the day of the sale, or in some cases, within 30 days of the sale if a 10-percent deposit is made. The sheriff then issues a deed to the winning bidder.
Deficiency Judgments and Rights of Redemption in Louisiana
In the event that the sale of the Louisiana foreclosure does not bring in enough money to cover the money owed on the property, the lender can file suit for a deficiency judgment against the former homeowner. However, this is only an option if the property was appraised before the sale. In order to obtain a deficiency judgment, the lender must:
1. File a separate suit after the executory foreclosure or
2. Convert the executory procedure to an ordinary procedure
This is important information for a real estate investor interested in buying Louisiana foreclosures because a potential seller should know under what circumstances they might face a deficiency judgment and owe additional money after losing their house via Louisiana foreclosure laws.
Louisiana does not offer former homeowners the right to redemption after the foreclosure sale. Once the sale is complete, a borrower has no recourse for recovering the home.
What Happens When You Buy Louisiana Foreclosures?
Once you have successfully purchased a Louisiana foreclosure, your deed will be recorded and you will have the right to get a writ of possession from the court. Once you obtain this, you can evict the former homeowner from the property. However, Louisiana, like many states, has enacted foreclosure and eviction moratoriums on at least one occasion since the housing crash in the mid-2000s. In April 2020, due to the COVID-19 pandemic, Louisiana Governor John Bel Edwards extended an executive order that would protect eligible borrowers and tenants from being evicted from their homes for nonpayment on their home loans or rent. In most cases, these properties may not get to the point of a foreclosure sale, but real estate investors who buy Louisiana foreclosures must remain abreast of legislation and regulation that might affect their ability to acquire and control these properties.
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