What Does Pre Foreclosure Lis Pendens Mean?

Defining Lis Pendens

A “lis pendens” is a Latin term meaning “suit pending.” It serves as a formal, public notice that a lawsuit involving a property’s title is ongoing. This legal document is filed in the county’s public records where the property is located. Its primary purpose is to alert potential buyers or lenders that the property is subject to litigation, preventing its transfer free and clear of pending legal claims.

A lis pendens is generally filed when a party initiates a legal action affecting a specific piece of real estate’s ownership, possession, or other interests. For example, a mortgage lender typically files one when beginning a judicial foreclosure lawsuit against a homeowner who has defaulted on payments. This filing indicates that any subsequent interest acquired in the property, such as through a sale or new loan, may be subject to the lawsuit’s outcome.

A lis pendens document typically contains details identifying the property and the dispute’s nature. It usually includes the names of the parties involved, a legal description of the property, and a brief statement about the claim. This information provides sufficient details for anyone performing a title search to understand the pending litigation.

Lis Pendens and the Foreclosure Process

The filing of a lis pendens marks a significant step in the pre-foreclosure stage, especially in states requiring a judicial foreclosure process. In these jurisdictions, a lender must file a lawsuit in court to obtain a judgment allowing them to sell the property to recover the outstanding mortgage debt. The lis pendens is typically filed concurrently with, or shortly after, the initial foreclosure complaint.

This legal filing serves as a formal public announcement that the lender has initiated legal proceedings against the property due to a mortgage default. It indicates the property’s title is now encumbered by a lawsuit, making its future ownership uncertain until the court resolves the case. Without a lis pendens, a property owner could potentially sell the property to an unsuspecting buyer unaware of the pending foreclosure action.

It is important to distinguish between judicial and non-judicial foreclosure processes. A lis pendens is primarily relevant in judicial foreclosure states, where court involvement is mandatory. In contrast, non-judicial foreclosure states allow lenders to foreclose through a power-of-sale clause in the mortgage or deed of trust, typically without requiring a court filing or a lis pendens.

Consequences for Property Owners

When a lis pendens is filed against a property, it creates a “cloud on the title.” This means the property’s legal ownership is no longer clear, making it difficult for the homeowner to sell or refinance. Most title insurance companies refuse to issue a policy for a property with an active lis pendens, and lenders will not provide financing for a purchase or refinance.

The lis pendens filing significantly affects the property’s marketability. Real estate agents and potential buyers performing due diligence or title searches will discover the pending lawsuit, deterring them from pursuing a transaction. This prevents the homeowner from selling the property to pay off the mortgage or refinancing to resolve the default, limiting options to avoid foreclosure.

While a lis pendens itself does not directly impact a homeowner’s credit score, the underlying mortgage default and subsequent foreclosure proceedings are the primary causes of credit damage. The public record of the lawsuit and eventual foreclosure judgment or sale will be reported to credit bureaus, leading to a substantial drop in credit scores. This makes obtaining new credit or loans challenging.

What Happens After a Lis Pendens Filing

Following a lis pendens filing in a judicial foreclosure, the homeowner typically receives formal notification of the lawsuit. This usually involves being served with a summons and a copy of the foreclosure complaint, officially informing them of the legal action. The homeowner then has a specific period, often 20 to 30 days, to file a formal response with the court, either acknowledging the default or presenting a defense.

The legal proceedings then progress through various stages, including discovery, motions, and potentially a trial if the homeowner contests the foreclosure. During this time, the lis pendens remains active on the property’s title. The court will ultimately issue a judgment, which, if in favor of the lender, grants them the right to proceed with a foreclosure sale.

The lis pendens remains on the property’s title until the underlying lawsuit is resolved. Resolution can occur in several ways, such as a court order dismissing the case, a judgment of foreclosure leading to a judicial sale, or a settlement. Homeowners might explore options like a loan modification, a short sale, or a deed in lieu of foreclosure to resolve the debt and avoid a completed foreclosure judgment, which typically leads to the lis pendens’ removal.