Tennessee Foreclosure Laws

Answers

How are mortgage liens treated in Tennessee?

Tennessee is generally known as a title theory state where the property title remains in trust until payment in full occurs for the underlying loan. The document that secures the title is usually called a deed of trust and in Tennessee the mortgage serves the same purpose and generally contains the same terms as a deed of trust and serves the same function in a judicial foreclosure.

How are Tennessee deeds foreclosed?

The primary method of foreclosure in Tennessee involves what is known as non-judicial foreclosure. This type of foreclosure does not involve court action but requires notice commonly called a sale under the power of sale. When the mortgage is initially signed it will usually contain a provision called a power of sale clause which upon default allows an attorney to foreclose on the property in order to satisfy the underlying defaulted loan which is sometimes referred to as a bond. 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 the trustee or other party conducting the foreclosure must notice the borrower of the sale at least twenty (20) days before the sale and publish the notice of foreclosure sale for at least three (3) weeks in a newspaper of general circulation in the county in which the property is located. The first publication must be twenty (20) days prior to the sale date. If no newspaper is available the notice must be posted in at least five (5) public places, including the courthouse and the property being foreclosed at least thirty (30) days before the sale.
2. Notice of foreclosure as described above must be served on borrower at least twenty (20) days before the sale and the notice must contain information on the property being foreclosed upon, and provide the manner and place of sale.
3. The sheriff will auction the property to the highest bidder including the lender. Sales must occur between 10AM and 4PM. The sheriff can set a minimum bid as long as the same equals at least 50% of the fair market value of the property.

In Tennessee, 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. This process is called foreclosure by action. The property is then sold as part of a publicly noticed sale by the sheriff. 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 Tennessee mortgage?

The documents are known as the mortgage or in a commercial transaction, a security agreement. Sometimes the mortgage document is combined with the security agreement.  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 Tennessee?

Depending on the timing of the various required notices, it usually takes approximately 90-120 days to effectuate an uncontested non-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files for bankruptcy.

Is there a right of redemption in Tennessee?

Yes. Tennessee has a very long statutory right of redemption, which would allow a party whose property has been foreclosed to reclaim that property by making payment in full of the sum of the unpaid loan plus costs within two (2) years of the sale, unless this has been waived in the loan documents.

Are deficiency judgments permitted in Tennessee?

Yes. A deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage secures.

What statutes govern Tennessee foreclosures?

The laws that govern Tennessee non-judicial foreclosures are found in Tennessee Code, Chapter 21(Proceedings in Chancery), Part 8, §21-1-803 (Foreclosure Sale)