Montana Foreclosure Laws

Answers

How are trust deeds or mortgage liens treated in Montana?

Montana primarily operates as a title theory state where the property title remains in trust until payment in full occurs for the underlying loan. Foreclosure is a non-judicial remedy under this theory. The document that secures the title is usually called a deed of trust. Montana law also permits mortgages to serve as liens upon real property and for judicial foreclosures to occur through the courts. Montana is unusual in that whether or not a mortgage or trust indenture is used is dependant on both the size of the property and the amount of the loan. The Small Tract Financing Act of Montana permits trust indentures on parcels “not more than 40 acres” and mortgages are required to be used if a loan exceeds $500,000. Thus the majority of single family loans fall under the trust indenture statute which was specifically enacted to provide a less cumbersome method of foreclosure than by judicial means.

How are Montana mortgages foreclosed?

The primary method of foreclosure in Montana involves what is known as non-judicial foreclosure. This type of foreclosure does not involve court action but requires notice commonly called notice of sale. When the trust indenture is initially signed it will usually contain a provision called a power of sale clause which upon default allows a trustee to sell the property in order to satisfy the underlying defaulted loan. The trustee acts as a representative of the lender to effectuate the sale which typically occurs in the form of an auction. Montana has special rules on who can serve as a trustee which persons are limited to attorneys, banks, and title agents. Because this is a non-judicial remedy there are very stringent notice requirements and the legal documents are required to contain the power of sale language in order to use this type of foreclosure method.

Power of Sale Notice Requirements:

1. Prior to initiating a foreclosure sale the lender must record a notice of sale with the county clerk in which the property is located within 120 days of the sale and serve the same on the borrower by certified or registered mail, and be posted on the subject property at least 20 days before the sale and personally served on borrower.
2. A notice of sale as described above must contain certain information including a description of the default, the lenders identification of the recorded book and page of the trust indenture a breakdown of foreclosure costs and fees and the date and place of sale.  The loan may be fully paid off at any time prior to the sale. The notice must also be published in an approved newspaper for legal notices at least one per week for three weeks in the county in which the property is located.
3. Foreclosure sales must take place between 9AM and 4PM at the county courthouse in the county in which the property is located or at the trustee�s usual place of business so long as this is located in the county in which the property to be foreclosed is located. The property is sold to the highest bidder.

In Montana, the lenders can also go to court in what is known as a judicial foreclosure proceeding where the court must issue a final judgment of foreclosure. If the deed of trust does not contain the power of sale language, the lender must seek judicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in court along with what is known a lis pendens. A lis pendens is a recorded document that provides public notice that the property is being foreclosed upon.

What are the legal instruments that establish a Montana mortgage?

The documents are known as the trust indenture, and in a commercial transaction, a security agreement. Sometimes the mortgage document is combined with the security agreement.  Alternatively, a mortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in the note.

How long does it take to foreclose a property in Montana?

Depending on the timing of the various required notices, it usually takes approximately 140-150 days to effectuate an uncontested non-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and postponements of sales, or files for bankruptcy. Much of the ongoing delays in a foreclosure sales relate to the proper service of parties in interest, governmental agencies and junior lienholders. Difficulty is finding or serving these parties delays the process.

Is there a right of redemption in Montana?

Montana has a no post-sale statutory right of redemption for non-judicial foreclosures.

Are deficiency judgments permitted in Montana?

Generally No. A deficiency judgment may be not obtained using the non-judicial foreclosure process when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage or deed of trust secures.

What statutes govern Montana foreclosures?

The laws that govern Montana foreclosures related to trust indentures are found in Montana Code Annotated (2003) Section 71-1-301 et. seq. The laws that govern the foreclosure of mortgages are found in Montana Code Annotated (2003) Section 71-1-101 et. seq.