Difference between revisions of "Foreclosures in Pennsylvania"

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==Foreclosure Review==
+
==Overview==
−
* Mortgages are the only form of security instrument recognized in Pennsylvania.
+
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.<br>
−
* Mortgages must be foreclosed judicially.
+
<br>
−
* Judicial foreclosure of mortgages in Pennsylvania differs in several ways from judicial foreclosure in other states.
+
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.<br>
−
* Review of a judicial foreclosure requires review of the docket of the foreclosure action and some of the filings.  Key documents are:
+
<br>
−
** The court docket
+
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.
−
** The Complaint and any amended complaints
+
 
−
** Any Sheriff returns of service
+
==Underwriting==
−
** The Judgment of Foreclosure
+
===Foreclosure Action===
−
** The Writ of Execution
+
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.   
−
** The 3129 Affidavit and any supplements thereto
+
====Documents Required====
−
** NOTE: This list does not cover all of the requirements to ensure a valid foreclosure, but the basics that should be reviewed by a title examiner.
+
Note: This list is not exhaustive and other documents may need to be reviewed in a particular case.
−
* Foreclosure is commenced with a Complaint filed at the county level in the Court of Common Pleas.
+
* Full copy of Docket
−
** The Complaint must name as party defendants any parties who signed the mortgage as mortgagors and the record or real owners of the property. If the mortgagor is deceased, the personal representative, heir or devisee of the deceased party must be named. A mortgagor that is no longer a record owner may be left out as a defendant if the appropriate language is included in the Complaint releasing such person from liability. See [https://www.pacodeandbulletin.gov/Display/pacode?file=/secure/pacode/data/231/chapter1000/s1144.html&d=reduce Pa. Rule of Civil Procedure 1144].  
+
* Complaint & Exhibits, and any Amended Complaints
−
** The Complaint must name the IRS/USA or any branch of the federal government required to be named as a party defendant per federal law.
+
* Affidavits of Service of Complaint (or Order and Proofs of Service)
−
** Other junior lien holders do not need to be named as party defendants but must be served with notice of the foreclosure and sale (see below).
+
* Judgment
−
** Senior liens cannot be discharged in a foreclosure.
+
** Default judgment with 10-day Notices, OR
−
* Note that no Lis Pendens document is filed in the public records for a foreclosure even though it is commonly done with other lawsuits affecting real property in Pennsylvania.   Any Lis Pendens filed in a foreclosure action will not have any effect on third parties.
+
** Motion for Summary Judgment with Certificate of Service, and final Order granting judgment, OR
−
** Liens filed by other junior lien holders after the Complaint will still attach to the property.
+
** Verdict and Praecipe to reduce verdict to judgment
−
** Foreclosure attorneys will need to obtain updated foreclosure searches in order to serve additional parties until the Writ of Execution is filed in the case.
+
* Writ of Execution with Legal Description of Property
−
** Once the Writ of Execution has been filed, any junior lien holders filing after that date are not entitled to service of any notices.
+
* 3129.1 Affidavit and any Amended Affidavits
−
* Initial service on any party defendants must be done personally unless otherwise allowed by the rules of civil procedure.
+
* Affidavits of Service of Notice of Sale on Defendants
−
** Typically initial service will be done by the county Sheriff.
+
* Affidavits of Service of Notice of Sale on Lienholders (with proofs of mailing)
−
** Service can be verified by reviewing the docket, or, if the docket is not clear, by reviewing the completed writs of service in the case file.
+
* Sheriff’s Proposed Schedule of Distribution (if available)
−
** Once initial service has occurred, service of notices is done on party defendants by certified mail and posting the property.
+
* Recorded Sheriff’s Deed (if available)
−
* Service on any junior lien holders who are not party defendants must be by certified mail.
+
* Any Orders related to local mediation/conciliation programs imposing or lifting stays (if applicable)
−
** Service is typically handled by the foreclosure attorney.
+
* Any Orders postponing the Sheriff’s Sale (if applicable)
−
** Service can be verified by reviewing the 3129 Affidavit filed by the foreclosure attorney which usually includes copies of the certified mail receipts.
+
* Any Notices of bankruptcy filings or relief/discharge/dismissal (if applicable)
−
** There may be multiple 3129 Affidavits in each case file due to junior liens being filed against the property prior to the Writ of Execution (see above).
+
 
−
* Failure to name and serve any party defendants may invalidate the foreclosure.
+
====Complaint and Service====
−
* Failure to serve any junior lien holders will result in their liens surviving the foreclosure.
+
* 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<br>
−
* NOTE ON 3129 AFFIDAVITS: The Rules of Civil Procedure require notice on all junior lien holders including for liens that cannot be discharged by foreclosure such as real property taxes. As a result, the 3129 Affidavit must show service on these parties. Do not assume that because a party was given service in the foreclosure that the lien will be discharged at the conclusion of the foreclosure. Also, in an abundance caution, many foreclosure firms will name all governmental and other entities that could potentially have liens on the property even if no liens are found in a title search.   Do no be surprised to find service on several branches of state and local government that do not have any liens of record.
+
<br>
−
* Once a Judgment of Foreclosure has been entered by the court, a Writ of Execution can be issued.
+
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.
−
* Once the Writ of Execution has been issued, the property can be schedule for Sheriff Sale.
+
−
* Properties are sold publicly at Sheriff Sale in the county courthouse each month. Anyone may bid including the "attorney on the writ" who represents the foreclosing lender.
+
* Complaint filed in the Court of Common Pleas of the County where any part of Property is located
−
* There is no right of redemption in any parties once the sale has been completed except for those given for federal liens.
+
** All Mortgagors named as Defendants
−
* 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.
+
** All record owners named as Defendants
−
* 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.
+
** Personal Representatives, Heirs, or Devisees of deceased Mortgagors named unless released in Complaint<ref>See [https://www.pacodeandbulletin.gov/Display/pacode?file=/secure/pacode/data/231/chapter1000/s1144.html&d=reduce Rule 1144].<br><br></ref>
−
* 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.
+
** IRS/USA named if junior federal lien to be divested
 +
** Mortgage information listed
 +
** Chain of Assignments from original Lender to current Plaintiff, if applicable
 +
<br>
 +
Note: Except for the IRS/USA, junior lienholders are not made Defendants to the action, but will be served with Notice of Sale, below.<br>
 +
<br>
 +
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.
 +
<br>
 +
* Service of Complaint on all Defendants
 +
** Personal Service, OR
 +
** Substituted Service (Order of Court)<br>
 +
<br>
 +
Note: Cannot serve by mail within PA without Order authorizing service by mail<br>
 +
<br>
 +
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 <br>
 +
<br>
 +
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
 +
<br>
 +
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.<br>
 +
<br>
 +
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<br>
 +
<br>
 +
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.<br>
 +
<br>
 +
* 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<br>
 +
<br>
 +
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.<br>
 +
<br>
 +
 
 +
* 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<br>
 +
<br>
 +
* 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<br>
 +
<br>
 +
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)<br>
 +
<br>
 +
* Property vacant or any ejectment actions successfully completed<br>
 +
<br>
 +
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.<br>
 +
<br>
 +
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.)<br>
 +
<br>
 +
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===
 
===Federal Liens===
Line 54: Line 155:
 
*If the lien is an IRS lien, the USA has 120 days from the sale to redeem the property;
 
*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.
 
*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====
 
====Federal Tax Liens filed during Mortgage Foreclosure Action====
Line 68: Line 168:
 
See [https://wfgunderwriting.com/wp-content/uploads/filebase/national/bulletins/NB%202021-02%20CARES%20Act%20Moratorium%20on%20Foreclosures%20%E2%80%93%20Insuring%20Foreclosed%20Properties,%20CARES%20Act,%20Foreclosure%20Moratorium,%20Eviction%20Moratorium,%20State%20and%20Local%20Moratoriums.pdf WFG Underwriting Bulletin NB 2021-02 (March 12, 2021)]<br>
 
See [https://wfgunderwriting.com/wp-content/uploads/filebase/national/bulletins/NB%202021-02%20CARES%20Act%20Moratorium%20on%20Foreclosures%20%E2%80%93%20Insuring%20Foreclosed%20Properties,%20CARES%20Act,%20Foreclosure%20Moratorium,%20Eviction%20Moratorium,%20State%20and%20Local%20Moratoriums.pdf WFG Underwriting Bulletin NB 2021-02 (March 12, 2021)]<br>
 
<br>
 
<br>
 +
===== Cases Applying or Interpreting the CARES Act as Related to Mortgage Foreclosures =====
 +
* [https://www.westlaw.com/Document/I1fb23480e2d711ea9b80ec4c207131a3/View/FullText.html?transitionType=Default&contextData=(sc.Default)&VR=3.0&RS=cblt1.0 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 ====
 
==== CFPB Final Covid Rule ====
 
'''August 1, 2021 - January 1, 2022'''
 
'''August 1, 2021 - January 1, 2022'''
Line 79: Line 182:
 
<br>
 
<br>
 
See [https://www.consumerfinance.gov/rules-policy/final-rules/protections-for-borrowers-affected-by-covid-19-under-respa/ Final Rule under RESPA Regulation X]
 
See [https://www.consumerfinance.gov/rules-policy/final-rules/protections-for-borrowers-affected-by-covid-19-under-respa/ 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.<br>
 +
<br>
 +
See FHLMC Bulletin 2021-23; FNMA Lender Letter LL-20-21-02
  
 
=== State ===
 
=== 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 ===
 
=== Local ===
 +
https://www.pacourts.us/ujs-coronavirus-information <br>
 +
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<br>
 +
<br>
 +
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<br>
 +
<br>
 +
https://www.buckscounty.gov/713/Emergency-Orders <br>
 +
https://www.buckscounty.gov/565/Sheriff-Sales-Listings <br>
 +
 +
 
==== Delaware County ====
 
==== Delaware County ====
 
'''March 20, 2020 - April 16, 2021'''
 
'''March 20, 2020 - April 16, 2021'''
Line 89: Line 239:
 
<br>
 
<br>
 
See [https://delcopa.gov/sheriff/realestate.html Orders] listed on Sheriff's website.
 
See [https://delcopa.gov/sheriff/realestate.html 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.<br>
 +
<br>
 +
https://www.montcopa.org/3525/COVID-19-Emergency-Orders <br>
 +
https://www.montcopa.org/1374/Real-Estate-Sale-Dates <br>
 +
  
 
==== Philadelphia County ====  
 
==== Philadelphia County ====  
Line 96: Line 255:
 
<br>
 
<br>
 
See [https://www.courts.phila.gov/covid-19/ Admin. Orders 18, 20 of 2021].
 
See [https://www.courts.phila.gov/covid-19/ 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]]

Latest revision as of 07:13, 8 June 2022

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[1]
    • 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

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

  1. ↑ See Rule 1144.
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