How to stop a foreclosure in Tennessee, and what each option costs you

You stop a Tennessee foreclosure by ending the default before the trustee sells the house. Five routes do that: pay the past-due amount and reinstate, pay the loan off, sell the house and pay the loan from the proceeds, hand the deed to the lender, or file bankruptcy and get the federal automatic stay. Each one takes a different amount of money and time, and each leaves you in a different place afterward. Tennessee sells under a deed of trust without a court judgment, so the calendar is short and the sale date in your notice is the deadline every option works back from.

Reinstatement: pay the arrears and the loan continues

Reinstating means paying every missed payment plus the late fees, attorney fees and trustee costs the lender has run up, after which the loan goes back to where it was. Tennessee does not give you that right by statute. Check your deed of trust. The uniform Fannie Mae and Freddie Mac form gives a borrower a right to cure after acceleration, and many other loan documents do too, but the deadline and the amount both come from the document, not the state.

One statute does grant a cure right. Under § 45-20-104, a borrower on a high-cost home loan may cure the default and reinstate any time up to three business days before a foreclosure sale, and the lender must send a notice of that right at least 30 days before it publishes the foreclosure notice. Curing puts you back where you were and cancels the acceleration. The same section limits the fees a lender can charge you for exercising the right, and caps the borrower at one pre-foreclosure cure in a twelve-month period.

The cost of reinstatement is the whole arrearage in one payment, and it buys you the loan you already had. Ask the servicer in writing for the figure and the date it is good through, because the fees keep accruing while you gather the money.

Payoff: end the loan

A payoff retires the debt in full, including the arrears, the fees and the interest to the payoff date. Refinancing is how most owners reach that number, and a borrower who is 120 days delinquent has a hard time qualifying for a new loan. Payoff is worth pricing anyway, because the payoff letter is the number every other option gets compared against. Order it in writing and note the expiration date on it.

Selling before the trustee’s sale

A sale that closes before the trustee sells pays the loan off out of the proceeds and ends the foreclosure. Whatever is left after the payoff and the cost of selling is yours, which is the part a foreclosure takes away. The arithmetic is simple: the house has to be worth more than the payoff plus the closing costs. If it is worth less, the lender has to agree to accept less, which is a short sale, and the CFPB lists that among the options for a borrower behind on payments.

The constraint is the calendar. A closing needs a title search and a written payoff from the servicer, and both take days to order and days to come back. A listed sale adds showings, a buyer’s financing and an appraisal on top of that. Count backward from the sale date before you pick a route, and tell any buyer the date up front so nobody discovers it in the title search.

Our page on cash offer vs listing lays the two routes side by side with the months of carrying cost included, and how we calculate an offer shows the subtraction behind a cash number.

Deed in lieu of foreclosure

A deed in lieu hands ownership to the lender voluntarily instead of going through the sale. The CFPB describes it as turning the home over to the lender to avoid the foreclosure process. You walk away with nothing from the house, and the lender has to agree, which it will not do when other liens sit behind the mortgage.

Two things to settle in writing before signing one. First, the deficiency: the CFPB notes that lenders can still pursue the shortfall in some states and advises asking for a written waiver. Second, the tax: forgiven debt can create a tax bill, which is a question for a CPA before the paperwork, not after. Never sign a deed over to anyone outside a closing, and never pay a fee up front to a company promising to stop the foreclosure.

Bankruptcy: a question for a lawyer

Filing a bankruptcy petition triggers the automatic stay, which the federal courts describe as stopping most collection actions against the debtor and the debtor’s property, including a foreclosure. A Chapter 13 plan lets an individual bring past-due mortgage payments current over a reasonable period, and the courts note that the debtor can still lose the house by missing the regular payments that come due after filing.

Whether that fits your situation depends on your income, your other debts and what you want to keep. We are not lawyers and cannot advise you on it. Talk to a Tennessee bankruptcy attorney, and do it before the sale date rather than the week of.

What the sale leaves behind

Losing the house at the trustee’s sale does not always end the matter. Section 35-5-117 lets the lender sue for the difference between the sale price and the balance, with a rebuttable presumption that the sale price equaled fair market value. To reduce the deficiency you have to prove the house sold for materially less than it was worth. The lender has two years from the sale to file.

Section 66-8-101 gives a borrower two years to redeem after a sale made without a court judgment, unless the deed of trust waives that right. Most modern deeds of trust waive it. Search your document for a waiver of the equity of redemption before you count on a buy-back period.

What to do this week

• Find the notice and write down the sale date, then work every deadline back from it.
• Ask the servicer in writing for the reinstatement figure and the payoff figure, with the date each is good through.
• Send a complete loss mitigation application, keeping a copy of every page and proof of the date you sent it.
• Read your deed of trust for two things: a right to cure after acceleration, and a waiver of the equity of redemption.
• Call a HUD-approved housing counselor from the list in your servicer’s notice, or a Tennessee attorney, before signing anything that transfers the house.

If you want to know what a sale nets

Put the sale date in the form and we will work back from it. We buy for our own account, and we may assign our purchase contract to another buyer; when we do, the contract says so in writing before you sign. Our post on the Tennessee foreclosure timeline covers what happens on which day, and delinquent property taxes covers the separate clock that runs when the taxes are behind too.

This is general information, not legal or tax advice. Talk to a Tennessee attorney or CPA about your situation.