Pennsylvania law requires all banks to provide the home owner with a notice of default before a foreclosure action can be filed.
Act 6 requires banks to send a notice of default 30 days prior to filing a mortgage foreclosure complaint. Act 6 only applies to home owners whose mortgage balance is less than $221,540.00.
Another Pennsylvania law referred to as Act 91 also requires banks to send home owners information on Pennsylvania Homeowner’s Emergency Assistance Program (HEMAP). The Pennsylvania Housing Finance Agency (PHFA) administers the HEMAP program which provides home owners with cash assistance to cure the late payments on their mortgage.
Most banks will send a combined Act 6/Act 91 notice to the home owner prior to filing the mortgage foreclosure complaint. Pennsylvania courts have the power to dismiss a foreclosure matter if a bank fails to properly notify a home owner. In January of 2012, the Pennsylvania Superior Court dismissed a foreclosure matter filed by Beneficial Bank simply because the bank failed to provide the home owner with a Act 6/Act 91 notice before filing their foreclosure complaint. Beneficial Bank v. Vukman (2012).
After the home owner receives proper Act 6/Act 91 notice, the bank is allowed to file a mortgage foreclosure complaint. The complaint must be personally served on the home owner although banks can simply mail the complaint if they are unable to locate the defendant.
Once the foreclosure complaint has been served, the home owner has 20 days to file an answer. If no answer is filed by the home owner, the bank will send a “Notice of Intent to take Default Judgment.” This notice is referred to as a “ten-day letter” because 10 days later the bank is allowed to obtain a default judgment.
The bank then obtains a writ of execution on its default judgment which allows the home to be sold at a sheriff’s sale. The sheriff is required to advertise the sale of the home for several weeks before actually listing the home at a sheriff sale. The home may be sold to a third party investor at a public auction or purchased back by the bank. Typically, the property is purchased by the highest bidder.
If a third party investor purchases the home, the proceeds will be distributed first to the sheriff’s office to pay his costs and any real estate taxes and/or municipla liens, then to the bank to satisfy the first mortgage, with the remainder (if any) going to the home owner. The 2nd or 3rd mortgages are divested or erased after a sheriff sale. Under Pennsylvania law, the sheriff must post at his office a schedule of distribution within 30 days after the sale.
If the bank purchases the home at a sheriff sale, it may have the right to pursue a deficiency judgment against the home owner. A bank must file a deficiency judgment within 6 months from the date of acknowledgement on the sheriff’s deed. If the deficiency judgment is granted, the bank can use the deficiency judgment to execute on other assets of the home owner.