Tennessee Foreclosure Laws
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Tennessee is usually referred to as a title theory state wherein the title of the property stays in assurance until the payment of the loan in question is taken care off in full. A deed of trust is the document that keeps the title of the property secure. Mortgages in Tennessee usually hold the same information as a deed of trust and can function as the same in a judicial foreclosure.
A non-judicial foreclosure is the most frequently used process followed to foreclose on a property in Tennessee. In this process, no court-action is needed, but a sale under a power of sale notice is required. For selling a property to take care of the loan that has been defaulted on, also referred to as a bond, an attorney can use the power of sale clause which is typically incorporated in the mortgage at the initial signing period. This being a non-judicial recourse, some very strict requirements for notices are in place, and a power of sale clause has to be present in the legal loan documents for this process to be followed.
Before foreclosure proceedings are initiated, the trustee or whosoever is to conduct the foreclosure has to provide the borrower with a notice a minimum of twenty days prior to the sale. The notice of foreclosure sale needs to be published in a general circulation newspaper within the county where the property is situated for three consecutive weeks, at least. The first of these publications has to be made twenty days before the date of the sale. In cases where a newspaper is not available, the notice must appear in a minimum of five public places, the courthouse and the foreclosure property included, no later than thirty days prior to the sale.
The borrower has to be served with the foreclosure notice, as explained above, no later than twenty days prior to the sale. The notice has to include information about the property in foreclosure, and mention the place and manner of the sale.
The property is auctioned by the sheriff and goes to the party with the highest bid, the lender included. The sale must take place in between 10:00am and 04:00pm. Minimum bids can be set by the sheriff as far as they are not less than 50% of the property’s fair market value.
Lenders in Tennessee can also opt for a judicial foreclosure which takes place through a court, and it is the court that pronounces the final verdict on the foreclosure. This procedure is referred to as foreclosure by action. The property then sells at a sale conducted by the sheriff that has been publicly notified. A complaint, in combination a lis pendens (a legal document which is used to issue a notice to the public about the property in foreclosure) needs to be filed in the court.
The legal documents are referred to as mortgage, and in cases of commercial transactions, a security agreement. The security agreement is, on occasion, merged with the mortgage. A mortgage needs to be filed to authenticate the debt in question and its repayment terms, which find a mention in the note.
It normally takes around 90 to 120 days to get into effect a non-judicial foreclosure that is not contested; this does depend on the time required for different notices. If the action is contested by the borrower and if a delay or an adjournment of the sale is sought, or if bankruptcy is filed for by the borrower, the process can be stalled.
A very lengthy statutory right of redemption can be made use of in Tennessee wherein a borrower can pay the amount left on the loan and the costs, and then lay claim on the foreclosed property, within a period of two years from the sale. This right can be waived off in the documents of the loan.
If a foreclosure property sells for lesser than the amount on the loan secured by the mortgage at the public-sale, a lender can obtain a deficiency judgment.
Non-judicial foreclosures in Tennessee are governed by laws that are part of Tennessee Code, Chapter 21(Proceedings in Chancery), Part 8, §21-1-803 (Foreclosure Sale).
