When a bank seeks to foreclose and the Defendant homeowners do not file an appearance or answer the bank’s complaint, the bank will seek what is known as “default judgment.” Simply put, default judgment is a form of judgment entered where the bank gets judgment by default because no defense was proffered.
Homeowners may choose not to participate in their case for a number of reasons. They may have been told by their bank that they didn’t need to defend the lawsuit because they are applying for a loan modification (this is wrong, a loan modification does not stop the foreclosure). Homeowners may not be aware a foreclosure was filed against them because the bank served the summons by publication rather than personal service. Homeowners may simply not want to go to court and deal with the issue head-on. Lastly, some homeowners do not file an appearance and answer strategically – to avoid an in personam deficiency judgment.
Whatever the reason, if the bank gets a default judgment they are free to proceed to a foreclosure auction to sell the property (after waiting the statutory 90 days during the right of redemption). When homeowners discover they had default judgment entered against them, the best course of action is to seek out an attorney.
Default judgment can be addressed in a number of ways depending on the homeowners’ goals. If the homeowners wish to retain the property and fight the foreclosure, the homeowners can ask the court for leave to file an appearance and vacate default judgment. The defendants will need to file a “motion to vacate default judgment.” Courts dislike judgment by default, and therefore Judges are often willing to vacate default judgment provided not too much time has passed (if a foreclosure auction is scheduled within 30 days, the court is much less likely to grant default judgment). Upon granting a motion to vacate default judgment, the court will usually provide a certain amount of time to the defendants to file their answer (generally 30 days). If the defendants do not file an answer, the court, upon the bank’s motion, will again enter default judgment in the bank’s favor and will be unlikely to vacate that default judgment a second time. It is important to file an answer when the court has granted the ability to.
If the homeowners do not wish to fight the foreclosure, then the simple threat of a motion to vacate default judgment may be enough to get the bank to play ball on a loss mitigation option such as a deed-in-lieu, short sale, or consent foreclosure. Since the process of vacating default judgment and then responding to the affirmative defenses and bringing a motion for summary judgment takes a long time, the bank may be willing to work with the homeowner to avoid that lengthy process.
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If you are looking to short sell your property in foreclosure, reach out to a realtor today to determine your next steps.