Oklahoma Procedures

When a lender loans a homeowner money, two instruments are made: the promissory note explaining the borrower's promise to pay; and the security instrument providing for ownership to pass to the lender (mortgagee) in event of non-payment. This security instrument can take several forms depending on the state. In Oklahoma we normally use the form mortgage (some other states primarily use deed of trust). The word literally means "dead pledge" (French mort and gage). That is, the maker of the mortgage (mortgagor), the borrower, pledges the property as security in event of non-payment and this pledge dies when the note is paid off.

The process of "foreclosure" is the lender using the power in the security instrument to extinguish or foreclose the homeowner's ownership rights to the property. Oklahoma is a "judicial-process" state which means the lender must bring a law suit which is settled by a judge. Some other states, Texas for example, are "non-judicial" meaning the process does not need to go before a judge, and takes less time.

Oklahoma procedure most often requires that the lender bring a law suit in District Court, as Plaintiff. The court then issues a summons to the Defendant in the suit, the borrower, to answer the plaintiff's claim. This process of "Notice" is repeated for any other entity that may have a claim on the property. Procedures are very strict. One defense to a foreclosure action is to show that the plaintiff (their attorney) did not give proper notice to someone.

A mortgage is a claim or "lien" against real property (as opposed to personal property like a car). Properties often have several such liens against them and seniority is determined by the time of filing the lien. Typically a purchase money mortgage is "first" and home improvement mortgages and similar are junior to this "first mortgage." Foreclosure of a senior lien will extinguish junior liens.

The process is expensive, ponderous and slow, taking from 3 to 18 months or more, normally about 6 months (average 179 days). Eventually the judge in the suit issues a "Final Journal Entry of Judgment." In brief, this is an order to the Sheriff of the County to sell the property at auction. This court order also provides a number of other things, depending on the case. The best way to understand these orders is to read several of them.

At the Sheriff's Sale, the deputy announces the property by identifying plaintiff, defendant and case number. Normally, the plaintiff answers the deputy and states an opening bid. Bidders have given identifying information to a deputy before bidding. Bidding continues as at any auction. Plaintiffs can bid up to the amount of their claim as "credit," (on average, 75% are bought by plaintiffs and 25% by investors).

The winning bidder (if not the plaintiff) must then deposit with the court clerk a minimum of 10% of the bid price and the balance within 9 days. A "Confirmation Hearing" is held on a Friday about three weeks later, and a judge normally confirms the sale and directs the Sheriff to issue a deed to the the high bidder. If the high bidder was the plaintiff, the court confirms that ownership has indeed passed to the plaintiff as originally pledged.

Of course, a process as complicated as this can have many variations. This is only a general overview. We are conducting "Foreclosure Sale Workshops" which cover many variations and how understanding them can mean profits to an investor.