Property Mortgage Laws in Kentucky

Kentucky principally works as a lien theory state in which a property’s title stays as security on the primary loan. The lien is placed on the property through a document referred to as a mortgage. It is not permissible to use power of trust foreclosures through deeds of trust.

The lenders in Kentucky have to use judicial foreclosure proceedings through courts, and the courts issue final judgments on foreclosures. The property in question then sells at a publicly notified sale. A complaint in the court needs to be filed along with a lis pendens (a document that is recorded to notify the public about the property that is being foreclosed on). A party is usually given twenty days to respond to the compliant, after which a default is recorded.

LEGAL INSTRUMENTS

In commercial transactions, the document is referred to as a security agreement and is otherwise called a mortgage or note. In instances, the security agreement and the mortgage document are merged. A mortgage is filed to verify the loan in question and its repayment terms, which are included in the note.

TIME PERIOD

It generally takes around 150 days to bring into effect a foreclosure that is uncontested; this does depend of the schedule of the court. If the action is contested by the borrower, and if delays or adjournments of hearings are asked for; or if the borrower files for bankruptcy, the process can be delayed. If a property is abandoned by a borrower in the midst of the foreclosure process, the lender can take immediate possession of the property. The sale usually needs to be advertised for three weeks before the scheduled date of the sale by the lender.

RIGHT OF REDEMPTION

There is a statutory right of redemption in place in Kentucky where a foreclosed property can be reclaimed by the owner upon full payment of the balance on the unpaid loan and costs, with an additional 10% interest. The court provides a period of one year after the sale to redeem the property. However, this right is available only if the property is sold for less than two thirds of the property’s appraised value. The right of redemption that the mortgagor holds is saleable and a third party can buy it from the mortgagor.

DEFICIENCY JUDGMENTS

If the amount on the loan in question is more than what the property sells for at the public sale then the lender can obtain a deficiency judgment. The borrower then owes to the lender the difference of what the property was sold for and the original loan amount. Only in cases where foreclosure complaint has been personally served to the borrower and/or the foreclosure compliant was served but no answer was filed, can the deficiency judgment be made available.

STATUTES

Foreclosures in Kentucky are governed by a different section of the Kentucky Revised Statutes (KRS) Chapter 426 (Enforcement of Judgments).