Delaware Foreclosure Laws

Foreclosure laws are the legal procedures by which a lender will repossess collateral for a loan which is in default. These laws are normally applied when one fails to meet repayment for a mortgage. The lender therefore obtains legal right to sell off the property due to non payment by the owner.

Delaware is known as a lien theory state where the property acts as security for the underlying loan and title is held in the name of the borrower. The document that secures title to the property and stipulated the terms of payment is called a mortgage or note. When dealing with a commercial property, the document is call a security agreement.

Non judicial foreclosure

This state does not allow for a non judicial foreclosure. The mortgage does not contain the power of sale clause that would allow for a non judicial foreclosure.

Judicial foreclosure

The lender is required to undertake judicial foreclosure proceedings by obtaining final judgment for foreclosure from the Superior Court, which is the court that has jurisdiction over a foreclosure. The lender files a complaint called a scire facias allowing property to be sold in a public auction. Scire Facias is a legal theory where the borrower is required to prove that he has not defaulted on mortgage repayments as opposed to the lender proving that the borrower is in default on repayments. A lis pendens document is also filed. This is a public notice documents stating that there is a pending law suit against a particular property. The borrower is given 20 days to respond.

Process period

It takes approximately 175-200 days to effect a judicial foreclosure that is not contested depending on the time taken to process court documents. The process can be delayed if the borrower contests the sale in court and seeks to delay or postpone hearings or files for bankruptcy.

Notice of Sale

The sheriff takes 2-3 months to property advertise the auction. The sale notice is posted on the property and in public place for at least 14 days before the proposed auction date. The notice includes property description, date, time, and location of the sale. The sale notice must be posted to the borrower at least 10 days to the proposed auction. The notice should also appear on two local newspapers three times a week for two weeks.

The sale is then conducted at the property or the court house by the sheriff. The sheriff transfers ownership to the winning bidder within 1-3 months.

Redemption

Delaware does not allow for a statutory right of redemption. A confirmation hearing is scheduled 30 days after property auction. Before the confirmation, the borrower may redeem the property after which he has no further right to redeem property.

Deficiency judgment

The state of Delaware does allow for the court to issue a deficiency judgment when property is sold at a public auction for less that the loan amount secured by the mortgage. The borrower therefore still owes the lender money if the auction does not cover the outstanding loan amount.

Foreclosure laws may change from time to time in any state. It is therefore important to seek legal counsel to obtain updated information on foreclosure law in any state.