Foreclosure Process Overview
Provided by Martin, Leigh, Laws & Fritzlen, P.C.
In Missouri, foreclosures are handled both in and out of court. The typical foreclosure process takes about two months. There are two types of foreclosure that exist in Missouri – statutory judicial foreclosure and non-judicial foreclosure.
I. Judicial vs. Non-Judicial
A. Judicial Foreclosure
Statutory judicial foreclosure, found in Sections 443.190-443.280 Mo. Rev. Stat., allows a mortgagee to commence foreclosure actions in the circuit court in the county where the real estate is located against the original mortgagor, any persons who assumed the indebtedness, junior lien holders or judgment creditors, others claiming an interest in the real estate, and people having right of possession. Such foreclosure is a judicial proceeding only used where a non-judicial foreclosure has not been agreed upon, or in other instances where preliminary equitable relief is sought, such as a court setting aside the cancellation of record of a deed of trust, requiring a court to order the judicial foreclosure. See Louis v. Andrea, 338 S.W.2d 96 (Mo. 1960). This synopsis will focus on non-judicial foreclosures, as the vast majority of foreclosures in Missouri are non-judicial.
B. Non-Judicial Foreclosure
Typically, Missouri foreclosures are non-judicial because a contractual power of sale is valid in Missouri, a state which allows the use of Deeds of Trust to grant a security interest in real estate. See Chapter 443 Mo. Rev. Stat.; Abrams v. Lakewood Park Cemetery Ass’n, 196 S.W. 2d 278 (Mo. 1946).
Generally, foreclosure of a Deed of Trust occurs after (1) default in performance pursuant to the terms of the Deed of Trust, including the terms of the promissory note secured by the Deed of Trust, and (2) acceleration of the entire debt due. See Petring v. Kuhs, 171, S.W.2d 635 (Mo. 1943); Miller v. Jones, 635 S.W.2d 360, 362 (Mo.App. 1982).
A. Foreclosure Sale
Subject to the time limits set forth hereafter, a foreclosure sale may be conducted on any date after a Notice of Default is sent to the debtor. See Petring v. Kuhs, 171, S.W.2d 635 (Mo. 1943); Miller v. Jones, 635 S.W.2d 360, 362 (Mo.App. 1982). Only the requirements stated below for publication and mailing affect the choice of the actual date.
B. Notices of Sale
Notices of sale are required to contain the date, book and page of the Deed of Trust, name of each grantor on the Deed of Trust, the time, terms and place of sale, and a description of the real estate to be sold. The notice must be published and mailed to required parties.
Pursuant to Section 443.320 Mo Rev. Stat., a Notice of Foreclosure Sale must be printed in a newspaper published in the county in which the real estate is situated at least once a week for a total of four weeks, with the last publication being not more than one week before the sale date. If the land is located in more than one county, the notice must be published in each county. If the land is located in a Missouri first-class County, of which there are three, publication is for 21 consecutive days in a daily newspaper with the last day being the date of sale.
Pursuant to section 443.325 Mo. Rev. Stat., the notice of sale must be mailed via certified or registered mail, postage prepaid and deposited in the U.S. mail at least 20 days before the date of the foreclosure sale. Such notice must be sent to the last known address of the original grantors in the Deed of Trust, the last known address of person’s shown by the recorder’s office to be the owners of the property as of 40 days before the date of the foreclosure sale, and any person who has recorded a request for notice of sale under the Deed of Trust either at least 40 days before the date of the sale or recorded under another Deed of Trust that was recorded before the Deed of Trust now being foreclosed, if that prior Deed of Trust is not released of record.
3. Notice to IRS
According to Internal Revenue Code Section 7425, notice of the foreclosure sale must be sent to the Internal Revenue Service if an IRS Notice of Lien on the real estate is filed more than 30 days before the date of the sale. This notice must be given by personal service or by registered or certified mail to the IRS District Director at least 25 days before the date of sale.
C. Additional Considerations
Some common situations may arise which affect the timelines for Deed of Trust sales such as death of owner or bankruptcy of debtor. Section 443.300 Mo. Rev. Stat. provides that in the event of the death of a person owning the real estate subject to the Deed of Trust, no foreclosure sale shall take place within six months of the date of death of such a person. Filing a petition for bankruptcy automatically stays any foreclosure proceeding at any stage until the Bankruptcy Court allows relief from the automatic stay or the stay is terminated upon the dismissal of the debtor’s bankruptcy case. See 11 U.S.C. Section 62(a). Section 443.355 Mo. Rev. The state allows the trustee to continue the sale, without re-publishing or re-mailing the notices, one time for a period not to exceed seven days so long as the continuance and new date and time is announced at the originally set date and time of sale.
After completion of the sale, and if no valid Notice of Redemption (discussed below), a Trustee’s Deed is furnished to the highest bidder as soon as feasible.
III. Where and How Sale Conducted
Pursuant to section 449.310, the sale shall take place in the county where the land is located. The sale shall be conducted at a commercially reasonable time, which can be any time between the hours of 9:00 a.m. and 5:00 p.m. See Section 443.327 Mo. Rev. Stat.
As a practical matter, the trustee will appear at the proper place and time as noticed and announce, or call, the sale inviting all interested persons to participate. The terms of the sale are announced, such as non-refundable 10 percent of sale price at the time of sale with balance due by close of business that day in the office of the trustee. The Notice of Sale, as published, is read and bids for separate parcels are taken, then bids for the entire property are heard until no more bids are made after a reasonable interval. The bid or bids that produce the greatest sale price will be accepted. The property is announced sold to the highest bidder.
Missouri law provides for both statutory redemption rights and periods and common-law, equitable redemption.
A. Statutory Redemption
Statutory redemption allows for two types of redemption of the property. On one hand, property can be redeemed at any time before the foreclosure sale by payment of the entire balance of the debt and foreclosure expenses incurred up to that time. Section 443.400 Mo. Rev. Stat.
On the other hand, property may be redeemed after the sale only when the purchaser at the foreclosure sale is the holder of the debt or is any other person for such holder. Section 443.410 Mo. Rev. Stat. The right of this latter, statutory redemption is available only to the original mortgagor (and his heirs, devisees, executors, administrators, grantees or assigns) and the original mortgagor must do the following:
1. Give written notice to the trustee at the sale or within 10 days before the advertised date of the sale;
2. Post a bond within 20 days after the sale in the circuit clerk’s office along with a Motion for Approval and giving the purchaser one day’s notice;
3. Bond must be approved by the court within 20 days after the date of the sale;
4. Bond must be executed by mortgagor and at lease one good surety, and in sufficient amount; and
5. Mortgagor must, within one year for the date of the sale, pay the full amount of the debt secured by the Deed of Trust, full amount paid by the purchaser for interest and principal on any prior encumbrance of the property, taxes and assessments, and legal charges and costs of the foreclosure. See Sections 443.410, et seq., Mo. Rev. Stat.
B. Equitable Redemption
Under common-law, equitable redemption is potentially available after any foreclosure, and is essentially an equity action in which the mortgagor seeks relief from the Court by showing fraud or other defect in the sale causing the mortgagor damage, such as the property sold for a lower price than it would have absent the defect. A judgment in favor of the mortgagor allows for a one-year redemption period.
C. IRS Redemption
As discussed above, the IRS must receive notice of a sale if a Notice of IRS Lien on the real estate is filed more than 30 days before the date of the sale. Even if the Notice of Sale is given, the IRS has the right, within 120 days from the date of the foreclosure sale, to redeem the property by paying to the successful bidder the amount of the bid plus interest from the date of the sale. I.R.C. Section 7425.
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