Tennessee Foreclosure Law

Tennessee is a non-judicial foreclosure state. The security instrument most commonly used is a deed of trust which usually contains a power of sale provision and names a trustee who holds legal title to the property and is authorized by the security instrument to commence default proceedings. Foreclosure proceedings can not be initiated without receipt of a recorded deed of trust and a payoff statement (including per diem). Other documents that are preferred and would be very helpful are copies of the note, unrecorded deed of trust (if that is all you have), any assignments of the deed of trust and a title policy.

Upon default, the trustee is empowered to advertise the property for sale. Although a deed of trust may contain additional requirements, the Trustee must generally cause an ad to be run in three consecutive publications in a newspaper regularly published in the county where the sale is to take place. The first publication must be at least 20 days before the sale date. The notice must contain the names of the “parties interested” (including record holders of any mortgage, deed of trust or other lien recorded more than 10 days before the first ad is run), a description of the land (including street address, if available) and the time and place of the sale (all sales are required to be held between 10:00 a.m. and 4:00 p.m.). The notice must also specifically identify any lien claimed by either the United States or the State of Tennessee and affirmatively state that notice has been given to these entities (including attaching, as an exhibit, a copy of such notices). Additional notice requirements may also be contained in the deed of trust such as whether notice must be made by regular or certified mail to borrowers and junior lienholders.

If properly conducted the foreclosure sale will divest the borrower of all rights in the property and eliminate all junior liens other than property tax liens with the United States and the State of Tennessee having 120 day redemption periods following the sale. In Tennessee, borrower may reinstate their loan right up to the point of sale by paying all sums due including the costs of collection. In addition, borrowers are given a two year period under which they may redeem the property through payment of the total indebtedness, plus fees and costs. However, such redemption rights are generally waived under most security instruments in use in Tennessee. After the sale, title is transferred to the highest bidder at the foreclosure sale. The average time to complete a sale is 60 to 90 days.

In the event that the bid at the foreclosure sale is less than the total indebtedness (including the fees and expenses of sale), a suit for a deficiency judgment may be brought against the original makers of the note and any subsequent parties who might have assumed the debt. The statute of limitations to pursue a foreclosure action is generally 10 years from the maturity of the debt.

The purchaser at the foreclosure sale must generally file a separate forcible entry and detainer action to remove occupants from the premises. Service of process (by various methods) must be completed upon all individuals claiming possession of the property. Once service is accomplished a trial date can be scheduled within six days and a judgment of possession can be entered. The defendant has 10 days to appeal this judgment.