In the state of Alaska, lenders are allowed to foreclose on defaulted mortgages or deeds of trust utilizing either a non-judicial or fully judicial process. Foreclosure is a legal procedure in which one who lends attempts to recover the missing balance of a loan which a borrower failed to make payments on by forcing the asset to be sold as collateral. When a house is in foreclosure, the tenant ceased to meet deadlines on their monthly payments to own their home (mortgage) typically due to financial constraints and the bank (or other lender) must now sell the property to make up for the lost reimbursement / interest profit (Loftsgordon, n.d.). The judicial process requires the tenant to file a lawsuit in order to acquire a court order to foreclose. This practice has been increasingly implemented since the late 1980s in which lenders discovered they were foreclosing on properties that were worth far less than what they owed to the lender (Loftsgordon, n.d.). For the majority of cases, the home is put on auction to be purchased by the highest bidder after declaration of foreclosure. Unfortunately, once the court is involved, the borrower can never redeem their property as deficiency suits are authorized and the rules of equity are in place.
Conversely, the non-judicial process is utilized in the event that a power of sale clause exists in either a deed of trust or a mortgage. By definition, this power of sale clause dictates pre-authorization on behalf of the borrower for the property’s sale to pay off the remaining balance on a loan if they were to default (Loftsgordon, n.d.). This allows circumvention of the courts such that the owner of the house is allowed to sell their property via permission executed by a trustee (typically the lender or the lender’s representative). Given the obvious advantages and lack of legal intervention, this procedure is the most common methodology taken when declaring foreclosure. However, power of sale clauses can only be implemented at the time of purchasing the house, and if the mortgage or deed of trust contains such a clause, it must specify the place, time, and terms of sale. Subsequently, it must meet Alaska’s minimum protection laws. If it doesn’t, the procedure is carried out in a series of three phases. Initially, the trustee is required to record a default notice in the office of the district in which the house is located no less than 30 days after defaulting and no less than 90 days before the sale (Loftsgordon, n.d.). The notice must indicate the borrower’s name, the book and the page in which the deed is record and must describe the default, the amount owed on behalf of the borrower, the desire to sell on behalf of the trustee, and the property. Furthermore, it must state the place of sale, time, and date.
Within no more than 10 days after the default’s notice is recorded, the trustee is required to mail a copy of the notice via certified mail to the last known addresses of any occupant, any individual who is liable to lay claim to the property as indicated by record or is known personally by the trustee, and the borrower (United States Foreclosure Laws, n.d.). At any point before selling, the borrower has the option to halt the sale and cure the default through payment of a sum equal to the missing balance owed in addition to any fees associated with attorneys. While it is possible that the lender will require their borrower to pay off the loan’s entire remaining principle balance, they often only required the attorney fees and the missing payments to cure the default (United States Foreclosure Laws, n.d.). However, in the unfortunate event that a lender has recorded a default notice more than once then the state of Alaska claims that the lender is able to refuse money from the borrower to cover attorney fees and missing payments by proceeding with the foreclosure sale. Similar to the judicial process, the sale is required to be made specifically “at a public auction held at the front door of a courthouse of the superior court in the judicial district where the property is located” (United States Foreclosure Laws, n.d.). Subsequently, the trustee is required to sell to the highest bidder which could include the lender if they desired to attend.
Sale of any portion or all of the property may be postponed by the trustee through the delivery of a signed and written request to the person conducting the sale at a specified hour and date. Upon receiving this request, the salesperson will public announce the delay to the stated hour and date at the place and time originally set for the sale. If the sale is postponed again, the same requirements are to be followed. In non-judicial foreclosure only, the borrower is provided the right to redeem their property and as such deficiency suits are not permitted. In the event that a tenant declares bankruptcy, cash exempts total to $1,890 for one individual and $2,970 under state exemptions for sole wage earner (United States Foreclosure Laws, n.d.). Conversely, under federal exemption, the cash totals to approximately $12,725 for one individual and $25,450 for married couples. (United States Foreclosure Laws, n.d.) These laws were set in place based on an opinion in the 9th Circuit Court of Appeal that ruled that residents of the state may select the federal exemptions over the state’s. Members on active duty in either the Alaska Naval Militia and the Alaska National guard are protected by the Servicemembers Civil Relief Act by order of the governor (United States Foreclosure Laws, n.d.).
- Loftsgordon, A. (n.d.). Alaska Home Foreclosure Laws. Retrieved September 18, 2017, from http://www.alllaw.com/articles/nolo/foreclosure/laws-in-alaska.html
- United States Foreclosure Laws. (n.d.). Alaska Foreclosure Law Summary. Retrieved September 18, 2017, from http://www.foreclosurelaw.org/Alaska_Foreclosure_Law.htm