Foreclosures in Pennsylvania

Overview

Mortgages are the only form of security instrument recognized in Pennsylvania. Mortgages must be foreclosed judicially and Pennsylvania does not recognize any kind of self-help foreclosure or eviction. The mortgage foreclosure begins with a Complaint (not a Writ of Summons). Once judgment is entered, a Writ of Execution can be filed which will cause the Property to be scheduled for Sheriff's Sale.

Sheriff's Sales are usually held monthly, but are subject to the schedules of the Sheriffs of the various Counties. Each Sheriff's Office will have it's own procedures for scheduling of sales, and for bidding. Some Counties have switched to online bidding auctions. The auction is open to the public, but cannot be held unless a representative of the Plaintiff is present. There is no right of redemption in any parties once the sale has been completed ("the fall of the hammer") except for those given for federal liens.

Once the sale is finalized, the Sheriff's office will prepare a deed, sometimes called a "Deed Poll" to convey the property to the winning bidder. Title becomes vested in the purchaser at the foreclosure sale when the Sheriff's Deed is recorded. This may take several months in some counties. Actions to eject holdover tenants including the foreclosed borrowers must be pursued in a separate action from the foreclosure. The civil court records in the Prothonotary or its equivalent must be checked even after foreclosure has been completed to ensure that there are no pending ejectment actions.

Underwriting

Foreclosure Action

Judicial foreclosure of mortgages in Pennsylvania differs in several ways from judicial foreclosure in other states. Review of a judicial foreclosure requires review of the docket of the foreclosure action and some of the filings.

Documents Required

Note: This list is not exhaustive and other documents may need to be reviewed in a particular case.

• Full copy of Docket
• Complaint & Exhibits, and any Amended Complaints
• Affidavits of Service of Complaint (or Order and Proofs of Service)
• Judgment
  • Default judgment with 10-day Notices, OR
  • Motion for Summary Judgment with Certificate of Service, and final Order granting judgment, OR
  • Verdict and Praecipe to reduce verdict to judgment
• Writ of Execution with Legal Description of Property
• 3129.1 Affidavit and any Amended Affidavits
• Affidavits of Service of Notice of Sale on Defendants
• Affidavits of Service of Notice of Sale on Lienholders (with proofs of mailing)
• Sheriff’s Proposed Schedule of Distribution (if available)
• Recorded Sheriff’s Deed (if available)
• Any Orders related to local mediation/conciliation programs imposing or lifting stays (if applicable)
• Any Orders postponing the Sheriff’s Sale (if applicable)
• Any Notices of bankruptcy filings or relief/discharge/dismissal (if applicable)

Complaint and Service

• Pre-foreclosure Notices sent at least 33-days prior to Complaint filing (Act 6 – 41 PS 403; Act 91 – 35 P.S. 1680) – usually attached to Complaint as an Exhibit or averred in body of Complaint
  

Note: If Act Notice was sent between 5/7/20 – 9/1/20, or 33 days expired during that timeframe, make sure to check for COVID compliance.

• Complaint filed in the Court of Common Pleas of the County where any part of Property is located
  • All Mortgagors named as Defendants
  • All record owners named as Defendants
  • Personal Representatives, Heirs, or Devisees of deceased Mortgagors named unless released in Complaint
  • IRS/USA named if junior federal lien to be divested
  • Mortgage information listed
  • Chain of Assignments from original Lender to current Plaintiff, if applicable

Note: Except for the IRS/USA, junior lienholders are not made Defendants to the action, but will be served with Notice of Sale, below.

Note: A Lis Pendens is not filed in mortgage foreclosure actions, but the judgment will relate back to the recording of the mortgage for purposes of priority.

• Service of Complaint on all Defendants
  • Personal Service, OR
  • Substituted Service (Order of Court)
    

Note: Cannot serve by mail within PA without Order authorizing service by mail

Note: If the USA is named as a Defendant to divest a junior lien, USA must be served with the Complaint to both the Attorney General in Washington, D.C. and the local district attorney’s office (Eastern, Middle, or Western) of where Property is located. See 28 U.S.C. § 2410(b).

Judgment

• Judgment filed
  • If Default: 10-day Notices sent at least 21 days after Service complete and 11 days before Judgment was entered; Verification of Non-Military Service filed with judgment. Note: If USA is named as a Defendant, they have 60 days to answer. See 28 U.S.C. § 2410(b)
  • If Summary: final order entered and appeal not filed within 30 days or appeal disposed of
  • If Verdict after trial: no post-trial motions filed within 10 days, or motions disposed of; reduced to judgment by Praecipe; appeal not filed within 30 days or appeal disposed of

Writ of Execution and Notice of Sheriff's Sale

• Writ of Execution filed
  

Note: Any liens/interests obtained after the filing of the Writ do not require notice as long as the Sale was properly postponed according to the Rules of Civil Procedure. If the Sale is stayed and a new Writ is issued, the new Writ date would control. Important to determine the correct Writ date for the Sale that was actually held because multiple Writs can appear on a docket.

• Notice of Sheriff’s Sale on Defendants and Owners
  • Personal service
  • Substituted Service (Order of Court)
  • At least 30 days before sale

Note: If an Order was already entered authorizing alternate service of the Complaint, it may apply again to the Notice of Sale without getting another Order. See terms of Order.

Note: Anyone obtaining ownership of the Property after the Complaint is filed does not need to be served with the Complaint or made a Defendant in the action, but must be served with Notice of Sale if their ownership was recorded before the Writ of Execution was filed.

• Notice of Sheriff’s Sale on Lienholders
  • 3129.1 Affidavit filed
  • Notices sent by regular mail (with proof of mailing)
  • At least 30 days before sale
    

Note: Not all liens that are sent Notice can be divested, they must also be junior in priority to the foreclosing mortgage and not otherwise protected from divestment (i.e. Commonwealth liens, tax liens, municipal liens). Many foreclosure attorneys will send more notices than needed, or for liens that cannot be divested, and to government entities which may or may not have divestible liens on the property.

• Notice of Sheriff’s Sale Generally (Applicable to all sales)
  • Posting of handbills at Property by Sheriff
  • Advertisement by Sheriff
    • 1 general circulation
    • 1 legal publication
    • 1/week for 3 weeks
    • starting (1st publication) at least 21 days before sale
      

Note: A Sheriff’s sale may only be continued twice within 130 days of the original sale date without sending new notices, as long as the Notice of Continued Sale is filed on the docket. If a sale is postponed more than twice or longer than 130 days, Court approval is needed to waive additional service. Some Judges will require the Plaintiff to re-serve all parties with the new sale date. Any postponement Orders must be reviewed to determine if new service was required.

• Rule 3129.2 Affidavit attesting to completion of service filed on docket with necessary proofs, or Amended Affidavit, as applicable

Post Sheriff's Sale

• Sheriff’s Proposed Schedule of Distribution Filed within 30 days of Sale
• Exceptions/Objections not filed within 10 days of Proposed Schedule or Exceptions/Objections disposed of, including any appeals
  

• Recording and review of Sheriff’s Deed
• No Motions/Petitions to Set Aside Sale filed before recording of Sheriff’s Deed or all Motions/Petitions disposed of, including any appeals
• No Motions/Petitions to Set Aside Sale filed within 6 months of the recording of the Sheriff’s Deed or all Motions/Petitions disposed of, including any appeals
  

Note: If the USA was named as a defendant, they have 120 days to redeem if it was an IRS tax lien, and one (1) year to redeem for all other liens. See 28 U.S.C. § 2410(c)

• Property vacant or any ejectment actions successfully completed
  

Note: If ejectment action shows activity after 3/1/20, COVID moratorium compliance must be checked as eviction/dispossession requirements were often heightened or extended over foreclosure/sale requirements.

If Seller is the foreclosing lender and different from Plaintiff in Complaint

• Chain of Assignments from Plaintiff to current owner
• Assignment of Bid from Writ Plaintiff to current owner
• Current owner is a government-sponsored entity ("GSE") (FNMA, HUD, FHLMC, VA, etc.)
  

Note: Although rare, a Plaintiff in mortgage foreclosure may proceed to obtain a deficiency judgment against the Borrower/debtor by following the procedures of the Deficiency Judgment Act. This begins with filing a Petition to Fix Fair Market Value in the foreclosure action within 6 months of the sale. Normally, this should not affect title to the foreclosed property because any deficiency judgment would be in personam against the debtor and not attach to the foreclosed property which has already been sold.

Bankruptcy

Note: Due to the provisions of the automatic stay, any bankruptcy filing will stay a foreclosure whether or not notice is received by the foreclosure Plaintiff or their attorney. A bankruptcy filing made 10 minutes before a Sheriff's Sale starts would invalidate that sale. In such a scenario, the Sheriff's Sale should be set aside and any Sheriff's Deed stricken before a resale is held. Most foreclosure attorneys will note the time when the Sale started or when the specific property was sold. Likewise, a bankruptcy filed after the Sale was held, but before the Sheriff's Deed was recorded would stay the recording. The recording of the Sheriff's Deed is the final act of the foreclosure process.

• If bankruptcies filed during foreclosure, for each bankruptcy, either stay was lifted or BK was dismissed before FC continued.

Effect of Foreclosure

• Foreclosed Mortgage no longer a lien, even if still showing as open (the judgment merges with the Mortgage as a matter of law).
• Defendants no longer own Property
• Equitable ownership is vested in highest bidder when hammer falls at the Sheriff’s sale, complete legal title vested when Sheriff’s Deed is recorded.
• New owner’s right of possession does not begin until Sheriff’s Deed is recorded.
• Separate action is required to remove holdover tenants (if needed)
• Junior Liens divested (if given proper Notice)
• Municipal and Commonwealth Liens may only be divested if actually paid as part of the Sheriff's distribution
• Senior Liens (and any junior liens without proper Notice), survive sale. A Plaintiff can also make their sale subject to any other liens or interests of record, even if those liens would normally be divested.
• No right of redemption, but Statute of Limitations to file a petition to set aside a judicial sale is 6 months. After recording of Sheriff’s Deed, grounds for attacking a foreclosure sale are limited.

Unusual Scenarios

Interests in Property that are more than just liens can potentially trigger the obligation to name the holder of the interest as a Defendant; changes or errors in the legal description can cause the Sheriff's Deed to contain too much or too little land. Be wary of:

• Options to Purchase
• Installment Land Sale Contracts
• Easements, especially recorded post-mortgage
• Outsale conveyances, especially without a release of Mortgage if the land is still included in the foreclosure

Redemption

Pennsylvania law does not recognize a general right of redemption after the "fall of the hammer" of the Sheriff's Sale in a mortgage foreclosure action. Certain federal laws, discussed below, grant the United States a right of redemption on properties which the USA claims an interest.

Federal Liens

Senior Federal Liens

Federal liens which are recorded prior to the mortgage cannot be divested by foreclosure unless expressly agreed to by the federal government. See 28 USC 2410(c). There is an exception for federal tax liens and purchase money mortgages: If a federal tax lien is recorded against a grantee prior to obtaining the property, that federal tax lien attaches to the after-acquired property. However, if the grantee obtains a purchase-money mortgage to obtain the property, the purchase-money mortgage takes priority over the previously recorded federal tax lien in relation to that property. See IRS Publication 785 (10-2005). So if a purchase-money mortgage is foreclosed, it may divest a "senior" federal tax lien if the procedure below is followed.

Junior Federal Liens

If a federal lien is filed after the foreclosed mortgage was recorded, or the lien is considered junior to a purchase-money mortgage or through subordination, the United States must be made a defendant to the mortgage foreclosure action under 28 USC § 2410 in order to divest the federal lien. This is unusual under Pennsylvania law where other lienholders are not made party to the action. In addition, these requirements must be followed:

• The Complaint shall set forth with particularity the nature of the interest or lien of the United States;
• If it is an IRS lien, the complaint shall include (1) the name and address of the taxpayer whose liability created the lien and, (2) if a notice of the tax lien was filed, the identity of the internal revenue office which filed the notice, and the date and place such notice of lien was filed;
• Service of the Complaint must be made on both (1) upon the United States attorney for the district in which the action is brought or upon an assistant United States attorney or clerical employee designated by the United States attorney in writing filed with the clerk of the court in which the action is brought and (2) by sending copies of the process and complaint, by registered mail, or by certified mail, to the Attorney General of the United States at Washington, District of Columbia;
• The USA is given 60 days to file an answer
• If the lien is an IRS lien, the USA has 120 days from the sale to redeem the property;
• For all other federal liens, the USA has 1 year from the sale to redeem the property.

Federal Tax Liens filed during Mortgage Foreclosure Action

If a federal tax lien is filed during a mortgage foreclosure action, the action will divest the lien according to local law. See 26 USC § 7425; Tres. Reg. § 301.7425-1(c); Internal Revenue Manual 5.17.5.19.1). Therefore, the procedure of 28 USC § 2410 does not need to be followed. However, Notice of the Sheriff's Sale must still be sent as though the federal tax lien were like any other junior lien on the Property.

COVID-19 Moratoria

Federal

CARES Act

March 20, 2020 - July 31, 2021

• Applies to federally-backed mortgages
• Excepts vacant/abandoned properties

See WFG Underwriting Bulletin NB 2021-02 (March 12, 2021)

Cases Applying or Interpreting the CARES Act as Related to Mortgage Foreclosures

• United States v. Townsend, No. 1:20-CV-00004, 2020 WL 4819931 (M.D. Pa. Aug. 19, 2020) - federal foreclosure action, only notes that property is vacant as shown by service on defendants at alternate address, therefore CARES Act moratorium does not apply

CFPB Final Covid Rule

August 1, 2021 - January 1, 2022

• Technically effective August 31, 2021, but some servicers, such as FNMA and FHLMC, began complying on August 1 to avoid gap from CARES Act
• Applies to most servicers
• Applies to loans secured by principal residences (i.e. not investment properties or 2nd homes)
• Does not apply to reverse mortgages
• Excepts mortgages that were more than 120 days in default prior to March 1, 2020
• Excepts cases where Statute of Limitations would expired before January 1, 2022
• Can proceed if certain safeguards are met (proof may not be available from docket and may require supporting documentation directly from the foreclosure attorney or the lender)

See Final Rule under RESPA Regulation X

FHFA Foreclosure Moratorium

3/18/20-7/31/21 (9/30/21 for evictions)

• Applies to FNMA/FHLMC single-family mortgages
• Does not apply to vacant or abandoned properties.
  

See FHLMC Bulletin 2021-23; FNMA Lender Letter LL-20-21-02

State

Governor's Executive Order

5/7/20-8/31/20

• Applies to Act 6/Act 91 pre-foreclosure Notices
  • a) If Notice was sent during timeframe, it was considered sent on 9/1/20, so earliest date that new foreclosure Complaints could be filed was 10/5/20
  • b) If Notice was sent before timeframe, but would have expired during moratorium, time is added after 9/1/20 (i.e., if Notice had 10 days remaining, it would extend to 9/11/20).
  • c) If Notice expired prior to timeframe, then action could proceed 9/1/20 subject to judicial and local orders.
• Does not apply to foreclosures already filed

Supreme Court Judicial Emergency

3/19/20-6/1/20

• Prohibits dispossession (eviction/ejectment)
• Extends deadlines for filing some papers
• Local Orders continue to be effective until 6/21/21

Local

https://www.pacourts.us/ujs-coronavirus-information
Note: Supreme Court Order 6/21/21 terminated general authorization to declare local judicial emergencies

Allegheny County

March 16, 2020 - September 7, 2021

• Filing deadlines tolled 3/16/20 - 6/1/20
• Sheriff's Sales postponed 4/6/20 - 6/1/20
• No Sale June 2021
• All July-August 2021 Sales continued to 9/7/21 (See 6/2/21 Order on docket 23 WM 2020) UNLESS
  • judgment was entered before 1/1/20, OR
  • property is vacant or non-owner occupied and an Affidavit is filed on docket, OR
  • Court Order is entered allowing sale in July or August, OR
  • Property is commercial or undeveloped land
    

https://www.alleghenycourts.us/administration/EmergencyOperations.aspx

Bucks County

March 17, 2020 - April 9, 2021

• All filing deadlines tolled 3/19/20 - 5/8/20 (Order 2020-1; 2020-13.1)
• No judgments could be entered 3/19/20 - 5/31/20, unless by Court Order (Order 2020-4)
• No Writs could issue 3/19/20 - 5/31/20, unless by Court Order (Order 2020-6)
• Most Sheriff's Sales postponed 4/9/20 - 4/9/21, advertisement waived, new mailings required; Sheriff's sales moved to online starting April 2021
  • Some sales held June-July, September-December 2020
    

https://www.buckscounty.gov/713/Emergency-Orders
https://www.buckscounty.gov/565/Sheriff-Sales-Listings

Delaware County

March 20, 2020 - April 16, 2021

By various Emergency Court Orders, all Sheriff's Sales were postponed from March 20, 2020 until April 16, 2021. New Notice under 3129.2 was specifically NOT required.

See Orders listed on Sheriff's website.

Montgomery County

March 12, 2020 - October 28, 2020

• All filing deadlines tolled 3/12/20 - 6/15/20
• All Sheriff's Sales postponed after 2/26/20 to 10/28/20; moved to online after this point.
  

https://www.montcopa.org/3525/COVID-19-Emergency-Orders
https://www.montcopa.org/1374/Real-Estate-Sale-Dates

Philadelphia County

March 17, 2020 - August 31, 2021

By administrative Orders, in residential mortgage foreclosure actions, where the Sheriff's Sale was originally scheduled between March 17, 2020 and August 31, 2021, a special Motion must be filed to obtain Court permission to proceed to sale after September 1, 2021. The Motion should set forth the basis why the Property does not fall under a moratorium. The Motion and Order should be reviewed. Ostensibly, sales originally scheduled for after September 1, 2021 (or sales that were stayed and then re-scheduled after September 1, 2021 by filing of a new Writ of Execution) were not subject to this procedure, but the action may otherwise violate a local, state, or federal moratoria (such as the filing of the Complaint or entry of Judgment).

See Admin. Orders 18, 20 of 2021.

Cross Reference

For Sheriff's Sales held in execution under civil money judgments that are not mortgage foreclosures, see Civil Money Judgments in Pennsylvania