Hurricane Katrina: Legal Issues - Columbus School of Law

the loan and the fees associated with sale, the borrower may be liable for a "deficiency judgment" for the amount
remaining after the proceeds from the sale are deducted from the total amount owed. After an "disaster" is formally
declared, however, a mortgage holder's right to an out-of-court foreclosure may be limited.
What steps should be taken by a disaster victim who is unable to make mortgage payments?
Many private mortgage lenders are offering to work out plans with individuals, depending on their circumstances.
Some mortgage companies will offer relief in the form of deferment or suspension of payments, waiver of late fees
and penalties, suspension of negative reporting to credit agencies, or possible modification of the terms of the
existing loan. These provisions will be offered on a case by case basis at the discretion of the mortgage company. It
is important for affected individuals to contact their mortgage loan company to take advantage of all relief
opportunities available.
Can a lender foreclose on a Mississippi home through "power of sale" (non-judicial foreclosure)
for nonpayment after a disaster?
Protection from inequitable mortgage foreclosures is provided under Miss. Code Ann. §§ 89-1-301 through 89-1-329
when a major disaster has occurred. After a state of emergency has been declared by both the President of the United
States and by the Governor of Mississippi, a mortgage holder may not foreclose through an out-of-court power of
sale by the trustee in the designated counties. To foreclose, the mortgage holder must go through chancery court.
Out–of-court foreclosures are automatically enjoined once the affected counties have formally been declared "disaster
areas." In addition, if a mortgage holder attempts to proceed with judicial foreclosure, that proceeding may also be
enjoined by the court for up to two years. To obtain such relief, the homeowner must file a formal petition opposing
the foreclosure proceedings.
Are there any limits on the right to foreclose through judicial foreclosure?
If mortgaged property has been damaged as a result of the disaster, an attempted foreclosure sale may be enjoined by
a chancellor who has received a sworn petition asserting that the owners are not able to pay the amount due, and have
been unable to refinance the mortgage, and that, because of damage to structures on the property or economic
conditions caused by the disaster, the mortgaged property has depreciated in value in an amount that is more than
fifteen percent of its fair market value prior to the disaster. Upon receiving a proper petition, the court "shall" issue a
preliminary injunction without requiring a bond. No relief is available under this section unless a timely petition is
filed by the homeowner.
What relief is available to an owner of mortgaged rental property?
The relief available under Miss. Code Ann. § 89-1-301 et seq. also applies to residential rental property leased to a
third party, if the owner has sustained a loss of income in excess of fifteen percent of the average annual income
from the mortgaged property for the three years immediately prior to the disaster, and if the owner is making a good
faith effort to make the property habitable.
For how long may the foreclosure be stopped?
After a preliminary injunction is issued, the mortgage holder may file a petition to dissolve the injunction so that the
foreclosure can proceed. A hearing on that petition must be held within thirty days. At the hearing, the court may
enjoin the foreclosure sale for up to two years. However, the court may establish a reasonable monthly value to be
paid by the owner to maintain the property and to pay any taxes, insurance and interest on the mortgage debt during
this period. At the end of two years, if any past due principal, interest or taxes remain unpaid, the foreclosure sale
may proceed. At that time, the mortgage holder may also pursue any deficiency judgment against the owner that may
be appropriate.