Mortgage Note Investing in Kentucky

Kentucky is a judicial-foreclosure state. The lender files in circuit court and gets a judgment, the property is appraised, and the master commissioner conducts the sale. An uncontested file can reach that sale in five to six months from filing, and service problems, answers and the court calendar stretch contested files well past that. FIXnotes' deal math budgets about eight and a half months and roughly $6,760 per Kentucky foreclosure. Those are our planning figures, not a statutory clock. For the long tail, Fannie Mae allows servicers up to 720 days from the last paid installment to the sale in Kentucky (its Foreclosure Time Frames exhibit, for sales on or after July 1, 2025), a window that includes the time before filing and loss mitigation.

Redemption is conditional. If the property sells for less than two-thirds of its appraised value, the borrower can redeem within six months of the sale by paying the sale price plus 10% a year and the buyer's reasonable costs of carrying the property. The buyer still gets immediate possession and a deed that carries the borrower's redemption lien (Ky. Rev. Stat. §426.530). At two-thirds of appraisal or more, there is no redemption. For a second lien, the foreclosing lienholder must name every other lienholder, the court can't order a sale that prejudices their rights, and a junior can sell subject to a senior lien that isn't yet due (§426.690). In practice the first mortgage either gets paid from the sale or stays on the house, so check its status before you file.

Deficiency judgments are available, leaving personal recovery as possible upside beyond the collateral. Property taxes are billed once a year and due by December 31, with a 2% discount through November 1, a 5% penalty in January and 10% after that (Ky. Rev. Stat. §134.015). An unpaid bill becomes a certificate of delinquency that bears 12% simple interest (§134.125). Its lien has priority over other obligations on the property, your mortgage included (§134.420), and the holder can sue on it after one year and within eleven years of the delinquency (§134.546). Track tax status on every file.

Check licensing before you buy. Kentucky's mortgage statute defines a "mortgage loan company" as anyone who "makes, purchases, or sells mortgage loans" (§286.8-010), meaning consumer-purpose loans secured by residential property, and makes it unlawful to do that business in Kentucky without a license or an approved exemption (§286.8-030). The exemptions cover banks and other regularly examined institutions, government agencies and a few narrow cases (§286.8-020), none of which describes a typical note buyer, and a willful violation forfeits the right to collect interest and charges on the loan. Get a Kentucky attorney's read on your entity before you buy Kentucky residential paper.