The first thing to understand about mortgages in Missouri is that Missouri uses “deeds of trust” to record property ownership. A deed of trust is a document (filed in the county where the property is located) that secures the title of the property. Missouri is considered a “title theory” state in that title is considered to stay in trust with a trustee until the mortgage loan is paid in full.
Missouri law permits foreclosures to happen either through the courts or in a non-judicial manner through a trustee’s sale. Almost all deeds of trust these days have provisions in them (called “power of sale” provisions) that permit the lender to foreclose without filing an action in court, since this way is much faster and less expensive for the lender. Thus, almost all Missouri foreclosures take place by trustee sales, not by court action. What does all this mean for the average person? It means this: foreclosures in Missouri move along much more quickly than a foreclosure in Kansas (which requires it to be done through the courts). Things move fast in Missouri! You need to be alert to what is going on.
For residential properties, our experience has been that properties are moved along the foreclosure fast-track once the homeowner has fallen behind a few payments. With commercial properties, we have seen properties moved to foreclosure when the owner has only missed one single payment. There is no “hard and fast” rule here except that commercial properties seem to be moved faster than personal residences.
But there still are notice provisions that a lender must comply with. The basic notice requirements are found in the Missouri Revised Statutes Section 443.320. In a city of 50,000 people or more, the foreclosure sale notice must be published at least twenty times and continued to the sale date. Within twenty days of the sale date, the trustee is supposed to send the homeowner a letter by registered or certified mail notifying him or her about the time and date of the sale. The actual mechanics of how sales take place are described in Missouri Revised Statutes Section 443.327.
The whole process does not take very long. Missouri does have a “right of redemption” with regard to homesteads, but it is nothing like Kansas’s. It is found in Revised Missouri Statutes Section 443.420. Basically the property owner would have to come up with the entire balance of the loan plus costs within a year after the sale. But to exercise this right, a person has to provide notice in writing within 20 days after the sale date, and has to post a bond for all costs and fees. In practice, the redemption right provision offers no benefit at all for the average homeowner.
The foreclosure process in the state of Kansas is very different from that of Missouri. In Kansas, foreclosures are done judicially (unlike in Missouri). That means that to foreclose in Kansas, an actual civil court case is filed in the county where the property is located, and a copy of the civil action is served on anyone who has an interest in the property. Once a foreclosure action is filed, the homeowner is served with a copy and has the opportunity to file a response; if no response is filed, the lienholder wins by default and can proceed to the next phase of the foreclosure process. If a response is filed, the court will set the matter for further hearings until a final disposition is reached.
If a judgment is entered in favor of the lienholder, the next phase is for the lienholder to set the property for an actual foreclosure sale date. Certain notice requirements must be met. The sale must be advertised at least once a week for three consecutive weeks. The last advertisement must be between fourteen and seven days before the sale. Notice of the sale must be sent to the borrower at least five days after the first advertisement.
We have found that the foreclosure process in Kansas takes substantially more time than the process in Missouri. This is primarily because foreclosures in Kansas are all done judicially; that is, they have to be done within the court system. This process takes time. Commercial mortgages take substantially less time, since lienholders often write provisions into the commercial security agreements that give them the right to move things along faster.
There are redemption rights for homesteads in Kansas. The general time period in which to redeem the property (i.e., buy it back) is 12 months from the date of the foreclosure sale (see K.S.A. 60-2414). However, this period is shortened to 90 days if the homeowner defaults on the mortgage before paying off at least 1/3 of the total loan balance. A court can increase this period to six months if the homeowner loses his or her job during the 90 day period (K.S.A. 60-2414(m)). Also, if the mortgage(s) on the property constitute less than 1/3 of the market value of the property, the redemption period will be 12 months. The homeowner gets to retain possession of the home during the redemption period, unless he or she has sold or conveyed the redemption rights.
Redemption rights are not often exercised. The reality is that distressed homeowners normally do not have access to large lump sums of money to redeem the properties within the time periods permitted by statute. But they are still rights that a homeowner has, and they can provide certain big benefits in certain situations.