FORECLOSURE ISSUES AND PROCEDURE
STATUTE OF LIMITATIONS
The general statute of limitations in Mississippi is
three years [Miss. Code Ann. § 15-1-49]. Actions to enforce negotiable notes and demand notes are subject to
a six-year statute of limitations [Miss. Code Ann. § 75-3-118]. Actions to recover a deficiency must be commenced
within one year of the foreclosure sale date [Miss. Code Ann. § 15-1-23].
DOCUMENTS NEEDED TO START FORECLOSURE
of the mortgage or deed of trust, note, assignments and substitutions of trustee, itemization of account balance and arrearage
are essential. If the holder of the deed of trust is operating under a power of attorney or trust agreement, recorded copies
of these documents should also be provided. Copies of title policies and surveys are not usually required, but may be helpful
in resolving any title issues.
In Mississippi, a foreclosure may be accomplished either judicially
or under the power of sale provided for in the deed of trust. [Miss. Code Ann. 89-1-55 (1972)] Although
the vast majority of foreclosures are conducted under a power of sale, judicial foreclosures remain as a viable alternative
in situations that require reformation of the deed of trust, or where unusual circumstances dictate that suit be filed to
terminate any equitable rights of redemption of the mortgagor.
Unusual circumstances aside, foreclosures generally rely
upon the contractual provisions of the deed of trust as well as legislation implementing the non-judicial power of sale set
forth in these deeds of trust. Mississippi deeds of trust typically designate three parties: the Grantor (or mortgagor),
the Trustee, and the Beneficiary (or mortgagee). Although the trustee is vested with many powers and
functions, including the right to cancel the deed of trust upon satisfaction thereof, his function is generally limited to
that of initiating and conducting the foreclosure process. Upon conclusion of the foreclosure sale, the trustee then conveys
title to the property to the highest and best bidder at the sale. A typical power-of-sale foreclosure should require less
than 115 days from referral to conclusion.
POST-SALE/CONVEYANCE AFTER FORECLOSURE
A trustees or substituted trustees
deed is used to convey title after foreclosure.
Deeds-in-lieu of foreclosure are an option but, in most
cases, save little if any time from what would be involved in a typical power of sale foreclosure. A deed-in-lieu may be an
attractive alternative, if a title problem exists with the deed of trust, and the mortgagors otherwise hold clear title to
the property. In the absence of some particular circumstance that makes the deed-in-lieu a more expedient remedy, power of
sale foreclosures are often preferred. The deed of trust may already be insured under an existing title policy, and problems
associated with liens attaching subsequent to the deed of trust are avoided by foreclosure.
only notice requirements, in addition to the notice provided by advertisement for sale, are those which may be provided for
contractually in the deed of trust or those which may be imposed by the insurer, or guarantor of the loan, or that which may
be required to be given the beneficiaries of federal liens or may be required under the provisions of the Fair Debt Collection
Practices Act (FDCPA). It is customary, however, to provide the mortgagors with notice of default at least 30 days prior to
the sale date. There is no statutory requirement that junior lienors be given notice of foreclosure sale, although it is usually
beneficial to do so. If a bankruptcy order containing drop-dead relief has been entered, the order may also require
that notice of default be given to the debtor and his attorney.
SUBSTITUTION OF TRUSTEE
Although it is permissible for
someone other than the trustee to conduct the foreclosure sale as agent of the trustee designated in the deed of trust, the
preferred procedure is to appoint the person selected to conduct the foreclosure as substituted trustee, if he or she is someone
other than the trustee named in the deed of trust.
This approach allows the substituted trustee to exercise all powers
conferred upon the original trustee, including the authority to execute the necessary conveyance to the successful bidder
at the foreclosure sale. In order to be valid, the appointment of trustee must be properly executed and recorded on the land
records prior to commencement of the advertisement for sale. Mere filing is not sufficient; instead the instrument must be
recorded and spread at large on the land records of the proper county.
(or substitute trustees) notice of sale must be advertised for three, consecutive weeks in the county where the property
to be foreclosed is located. This involves publishing the notice of sale in a newspaper with general circulation in the proper
county on the same day of each week for at least three weeks. If only three publications are used, the sale date must be exactly
one week from the date of the last publication. If four publications are used, the sale may be held on any day (except a Sunday
or legal holiday) within one week from the date of the last publication. In addition, the notice of sale must be posted at
the courthouse of the proper county (and judicial district if the county involved has more than one judicial district) beginning
the same day publication begins on the notice of sale. The notice of sale must designate the original mortgagors, trustee,
beneficiary and otherwise describe the deed of trust. It should also set forth any assignments and substitutions of trustee,
including the dates of the various instruments and the book and page recording references. The notice must accurately describe
the property to be sold and the terms of the sale, i.e., for cash to the highest and best bidder. In addition, the notice
should specify the place of sale (i.e. the door of the courthouse where the sale will be held) and should indicate the time
of the sale (i.e. during legal hours between 11 A.M. to 4 P.M).
REINSTATEMENT AND REDEMPTION
An account in foreclosure
may be reinstated and the foreclosure stopped at any time prior to conclusion of the sale at the courthouse, provided all
past-due payments, late charges, expenses of sale, attorneys fees, and trustees fees are paid in full, in cash
or certified funds. [Miss. Code Ann. 89-1-59 (1972)] After the sale is concluded, the sale is final, and no statutory
post-sale right of redemption exists for the benefit of the mortgagor.
CONDUCT OF SALE AND ADJOURNMENT
sale may be conducted at any time between the hours of 11 A.M. and 4 P.M. on the date advertised for the sale, unless the
parties to the deed of trust contracted for more restrictive hours.
The sale is held at the door of the courthouse designated
in the notice of sale; however, the trustee or substituted trustee may adjourn the sale from day-to-day, if he wishes to do
so, by announcement to those present at the time and place specified for the original sale as to the time and place (which
must likewise comply with statutory and contractual requirements) of the adjourned sale to be held the following day.
the trustee reads the notice of sale, and then calls for bids from the company present at the sale. The mortgagee may bid
up to the amount of its total indebtedness without tendering any funds at the sale. Other bidders must be prepared to tender
funds in a form satisfactory to the trustee (ordinarily cash or certified funds) at the sale. If the highest bidder (other
than the mortgagee) fails to later deliver sufficient funds, the property may not be conveyed automatically to the second
highest bidder, but instead, the sale must be re-advertised.
After the sale has been successfully concluded, the trustee
or substituted trustee executes and delivers to the highest bidder a trustees or substituted trustees deed conveying
his interest in the property arising out of the foreclosure sale. Ordinarily, this deed together with a proof of publication
of the notice of sale is filed with the chancery clerk of the appropriate county immediately after the conclusion of the sale.
a surplus results from the sale (if the proceeds exceed the mortgagees total indebtedness, fees and expenses), the excess
would be distributed by the trustee in order of priority to any junior lien holders with the mortgagor to take anything remaining
upon satisfaction of all junior lienors of record. If there are any senior deeds of trust, they are usually not entitled to
receive the surplus or any part thereof.
Both HUD and VA require owners title insurance policies
to be issued on foreclosed property insured or guaranteed by them. HUD-insured loans should name the Secretary of Housing
and Urban Development as insured, and VA-guaranteed loans should be issued in the name of the Secretary of Veterans
Affairs. Usually, the amount of the title policy is the principal balance of the loan; however, in some instances, HUD may
require the policy be issued for a slightly greater amount.
There are no significant statutory exclusions
on either payoffs or reinstatements. The amounts must be allowable under the terms of the documents. Unless the fees or costs
are expressed in the documents as a set amount or percentage, they must be reasonable and customary.
it is possible to maintain a single action in Chancery Court to accomplish a judicial foreclosure and to recover judgment
for any deficiency remaining after a sale of the property, it is ordinarily more expedient to first conduct a power-of-sale
After the sale is concluded, a separate action may be brought to recover the deficiency between the total
indebtedness secured by the deed of trust and the proceeds resulting from the foreclosure sale, provided the bid amount meets
certain standards of reasonableness. Ordinarily, a deficiency suit would be filed in circuit or county court in the county
of residence of the obligors under the provisions of the deed of trust note. It is imperative, however, that any action seeking
a deficiency be filed within one year of the sale date; otherwise recovery would be forever barred by the statute of limitations.
Upon filing suit, the defendants are permitted 30 days from the date of service of process within which to answer the complaint.
If no answer is filed within the allotted time, the lender is entitled to recover judgment for the amount sought.
mortgagee intends to enter a bid at a foreclosure which would create a deficiency, if accepted as the highest bid, care should
be exercised to insure that the bid amount will pass judicial standards of reasonableness. Based upon decisions of the Mississippi
Supreme Court, most mortgagees specify bid amounts of 51 percent or more of the propertys fair value.
v. First National Bank of Vicksburg, 566 So. 2d 1218 (Miss. 1990), the Mississippi Supreme Court held that every aspect of
the foreclosure sale must be commercially reasonable. This standard applies not only to the sufficiency of the
bid amount, but also to the method of advertising and conducting the sale, as well as the time, place and terms of the sale.