Foreclosure process in Louisiana: executory process explained

Judicial, but not always a trial

Foreclosure here is always a court process, by two routes.

Executory process (the usual route). Under Code of Civil Procedure (CCP) art. 2631, it is used “to effect the seizure and sale of property, without previous citation and judgment, to enforce a mortgage or privilege thereon evidenced by an authentic act importing a confession of judgment.” The lender files a petition with authentic evidence of the note and the mortgage (arts. 2634-2636). The court orders a writ of seizure and sale (art. 2638). No citation is needed (art. 2640).

Ordinary process. The lender sues, the borrower is cited, and the case is decided before the sale. A lender that began in executory process may convert to ordinary process to seek a personal judgment (art. 2644).

The steps, in order

1. Missed payments. Federal servicing rules bar a servicer from making the first foreclosure notice or filing until the loan is more than 120 days delinquent, with limited exceptions (12 CFR 1024.41(f)).
2. Petition and writ. The lender files and the judge orders the writ of seizure and sale.
3. Seizure and notice. The sheriff seizes the home and serves the owner, personally or at home, with a written notice of seizure. It must set out the owner’s defenses and the sale date. For residential property it must also describe free housing counseling (art. 2721; R.S. 13:3852).
4. Earliest sale date. The first scheduled sheriff’s sale “shall not be scheduled any earlier than sixty days after the date of the signed court order commanding the issuance of the writ” (R.S. 13:3852(A)).
5. Advertising. The sale is advertised twice (art. 2722; art. 2331). The first newspaper ad runs at least 30 days before the sale, and the second between 7 days and 1 day before (R.S. 43:203(2)).
6. Appraisal. The home must be appraised before the sale, unless the mortgage waived appraisal and the lender asked for a sale without it (art. 2723).
7. The sale. The sheriff sells the home at public auction, in person or by online auction (arts. 2724, 2344). Both the owner and the lender may bid (art. 2339).
8. Occupancy. If the former owner stays, the new owner must give written notice to vacate allowing at least five days, then seek eviction in court (arts. 4702, 4731).

How long does it take?

Example (illustrative): a judge signs the writ order on March 2. The first sale cannot be scheduled before May 1 (60 days later). A sale can be postponed, so the actual date can be later. An owner who is served on March 10 has until March 25 to take a suspensive appeal.

Can you get the house back after the sale?

The articles of the Code of Civil Procedure on executory process and on sheriff’s sales that I read contain no post-sale redemption period for a foreclosed homeowner. The owner’s chances to stop a sale come before it:

• Injunction. A defendant may arrest the sale when the debt is extinguished or legally unenforceable, or when the required procedure was not followed (art. 2751). Some grounds, such as a forged mortgage or a debt that is paid or prescribed, do not require the owner to post security (art. 2753).
• Suspensive appeal. An appeal of the writ order must be taken within 15 days of service of the notice of seizure. Its security must exceed the balance due on the debt by one-half (art. 2642).
• Working it out with the lender. The notice of seizure itself tells residential owners they may be able to bring the account current through a loss mitigation agreement or reinstatement, “within the time permitted by law” (R.S. 13:3852(B)).

Deficiency judgments

If the sale brings less than the debt, the lender may get a deficiency judgment only if the property was appraised before the executory sale (art. 2771). If the lender used a waiver of appraisal, the debt is “fully satisfied and discharged” as a personal obligation of the borrower (R.S. 13:4106). To collect a deficiency, the lender must convert to ordinary process or file a separate suit, with citation (art. 2772).

The appraisal also protects the owner at the sale. A home cannot be sold for less than two-thirds of its appraised value at the first offering. If no one bids that much, it is re-advertised and sold for cash for whatever it brings (art. 2336). It also is not sold if the bid cannot pay the costs and the senior liens (art. 2337).

Where to get help

• HUD-approved housing counselors: HUD lists (800) 569-4287 to find one near you, and the Homeowners Hope Hotline at (888) 995-HOPE.
• Your servicer, early. The Louisiana Housing Corporation (LHC) says early contact with the servicer is vital. It lists forbearance, loan modification, repayment plans, reinstatement, and for FHA loans the partial claim.
• Apply before the 37-day line. The CFPB says to make sure your servicer gets a complete application “more than 37 days before your scheduled foreclosure sale.”
• A lawyer. The notice of seizure urges you to seek legal counsel and says free legal services may be available.

Related: seller disclosure (foreclosure sales are exempt) and real estate attorney.