Tennessee Foreclosure Law
Tennessee State Foreclosure Law dictates that lenders may avail of the Judicial and Non-Judicial processes to foreclose deeds of trust or mortgages in default. The typical time of process last about 60 days and the deeds of trust and mortgages are the security instruments used. Deficiency Judgments and the Right of Redemption are both allowed in Tennessee.
Judicial Foreclosure is used when no power of sale exists in the deed of trust or in the mortgage. Petitioners must file a lawsuit in order to obtain a court order to foreclose. It has been a general practice that when the court declares a foreclosure, the property will be auctioned off and will subsequently be awarded to the person making the highest bid for cash. On the other hand, Non-Judicial Foreclosure is used when a power of sale clause is expressed in the deed of trust or in the mortgage. “Power of Sale” is the process wherein the borrower agrees to sell the property in dispute to settle the remaining balance from a loan in case of default. Its most obvious difference from the judicial foreclosure is that it doesn’t need any court order to auction off the property as it is already stated in the security instruments. The lender or their duly designated representative, commonly referred to as the “trustee,” may execute the “power of sale.”
Power of Sale foreclosure Guideline:
Should the security instruments contain a power of sale clause, the terms specified therein must be strictly followed. Otherwise, the non-judicial foreclosure should be carried out according to the process specified as follows:
- A Notice of Sale must be published at least 3 times in a newspaper with a general circulation in the county where the property is located, with the first publication appearing at least 20 days before the foreclosure sale.
- Unless otherwise ordered by the court, it has been generally practiced that in the absence of a county newspaper, the Notice of Sale must be posted at least 30 days before the foreclosure sale in at least 5 public places within the county. The notices posted in public places should include one posted in the entrance of the county courthouse and another one in a conspicuous place within the property itself.
- The Notice of Sale must be served to the borrower at least 20 days before the foreclosure sale if the borrower is still in possession of the property.
- The foreclosure sale must take the form of a Public Auction where the property will be awarded to the highest bidder. The sale must be held between 10:00 a.m. to 4:00 p.m. The Sheriffs of each county of the State of Tennessee may set a minimum bid for the property as long as the price is greater than or equal to 50% of the property’s fair market value.
The successful bidder at the foreclosure sale will receive a certificate of sale and will receive a deed once the borrower’s right of redemption has expired.
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