New Mexico (NM) foreclosure laws require that foreclosures in the state be handled through the court system. The typical foreclosure process lasts about six months. For real estate investors working with distressed homeowners in New Mexico, familiarity with New Mexico foreclosure processes and New Mexico pre-foreclosure processes will be a big advantage. Because federal laws may affect the pre-foreclosure and foreclosure timelines either due to public health policies or financial policies, it is important to check state regulations regularly to make sure you are up-to-date.
The period of time when the borrower on a property has fallen behind on their payments but the lender has not yet begun the foreclosure process is called the pre-foreclosure period. In New Mexico, mortgages and deeds of trust for residential property must be foreclosed and sold in court due to a ban on power-of-sale clauses in most cases. The lender is not required by the state to notify the owner before initiating the pre-foreclosure process, although the mortgage or deed of trust may sometimes require this.
First, a foreclosure complaint is filed in court against the borrower and will include any other parties who have a stake in the property. Once the complaint has been filed, a Lis Pendens (pending lawsuit) is recorded with the county clerk of the county in which the property is located. The lender gives notice in person to the borrower, who has 30 days to answer the complaint. If the borrower cannot be located and served personally, the lender publishes a notice of the pending lawsuit once a week for four consecutive weeks in a local newspaper. Borrowers have 20 days from the date of the last publication to respond.
If the time limit for the borrower to respond has expired, the court enters a ruling, which can be agreed upon by the parties involved or decided in a hearing. At any time before the foreclosure sale, the borrower may satisfy the judgment by paying all arrears, costs and attorneys’ fees incurred. This stops the foreclosure proceedings.
New Mexico foreclosure laws are a little bit more complicated than those in many other states because New Mexico is a judicial foreclosure state for nearly all residential properties, although some commercial and business properties are eligible for non-judicial foreclosure. In 2008, the state adjusted some regulations and legislation around the use of deeds of trust, which are the legal structure used to facilitate non-judicial foreclosures for residential and commercial properties. However, New Mexico is still largely a judicial-foreclosure state.
Here are three things real estate investors should know about New Mexico foreclosure laws before getting started investing in New Mexico foreclosures:
1. Borrowers can redeem their property up to nine months after a foreclosure sale.
However, the terms of the loan may reduce that redemption period to one month. If you buy a New Mexico foreclosure, make sure you know how long the redemption period will be on that property before you invest.
2. Lenders may evict former residents more easily than other buyers.
If a lender is the highest bidder at a foreclosure sale, the lender can get a writ of assistance to evict the former owner as part of the judicial foreclosure action. If you buy a property at auction, you will have to handle the eviction process separately.
3. Uncontested foreclosures tend to take between 120 and 180 days.
The New Mexico foreclosure process usually takes between 120 and 180 days, not including any time in extended pre-foreclosure due to foreclosure moratoriums or eviction forbearance policies enacted on a local, state, or national level. Check local guidance to find out more about foreclosure timelines and how and when foreclosure sales are operating.
If the court rules against the borrower, the lender or the lender’s trustee publishes a notice of sale once a week for four consecutive weeks in a local newspaper. The sale is scheduled a minimum of 30 days after the court ruling and the final publication of the notice occurs at least three days before the date of the sale.
New Mexico foreclosure laws have historically stated that eligible bids on foreclosure properties will be a certain percentage (or higher) of the appraised value of the property. At one point, this value was 80 percent. In more recent years, the value was lowered to 67 percent (two-thirds) of the appraised value. You will need to verify with the auction platform if there is a guideline like this in place for a New Mexico foreclosure property that interests you.
In NM, former property owners have the right to reclaim the property within nine months of the foreclosure sale if they pay the full sum owed on the delinquent loan, taxes, and interest. However, some mortgage lenders include more stringent terms in their loan documents that may shorten this window of opportunity to 30 days.
In some cases, lenders can obtain deficiency judgments against borrowers whose properties sell for less than is owed on the mortgage. However, these judgments are not an option for sales related to low-income properties in some cases and may not be possible if the lender foreclosed via non-judicial foreclosure.
Former owners who remain in the homes after the foreclosure sale may be evicted via a separate lawsuit or, in the event that the lender included a writ of assistance in the judicial foreclosure process, may be evicted as part of that process. If the lender used non-judicial foreclosure, the new property owner will need to file a separate eviction action and abide by all local, state, and national eviction policies in effect at the point in time when the new owner acquires control of the property.
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