A lender may be allowed to select between a judicial and a non-judicial foreclosure if it decides to foreclose on your house. A judicial foreclosure is one in which the lender goes to court to get a judgment in order to foreclose on your property, whereas a non-judicial foreclosure does not need the lender to go to court. A lender can get a judicial foreclosure in every state, but non-judicial foreclosure processes are not available in every state. The distinction between these methods may affect how a homeowner mounts a defense to a foreclosure, if one is available. It can also impact the timetable of the procedure and how quickly you must act if you are unable to avoid foreclosure.
However, because each state’s procedures are slightly different, you may want to obtain specialized advice on your state’s regulations if you are facing foreclosure. Talking to a housing counselor approved by the US Department of Housing and Urban Development (HUD) or speaking with a foreclosure attorney are two options.
Foreclosure by the Courts
The lender will file a case in court, and a judge will weigh in on both parties’ evidence. A hearing may be held to determine if the homeowner is in default on the loan. To avoid foreclosure, the homeowner might try to strike an agreement with the lender before the hearing. If the parties are unable to reach an agreement and the court rules in favor of the lender, the court will issue a foreclosure judgment. This will result in a foreclosure auction, and the homeowner may be subject to a deficiency judgment for any outstanding loan balance not paid by the sale.
Knowing that this procedure might take a long time may calm some homeowners. They may be able to postpone a foreclosure for up to a year, if not longer. This might offer a homeowner more time to fix their finances and make backup arrangements.
Even though a non-judicial foreclosure is more efficient, a lender may opt to seek a judicial foreclosure in certain instances. This enables it to handle complicated property-related issues, such as a title dispute.
Foreclosure without a court order
The lender will pursue a foreclosure with the help of a foreclosure trustee rather than going to court at the outset of the process. This is a neutral third party who might be mentioned in the home’s deed of trust. (To learn more about the function of a foreclosure trustee, go here.) The non-judicial foreclosure process differs from state to state more than the judicial foreclosure process.
Before proceeding with a foreclosure, the lender or trustee may offer the homeowner time to make up missed payments on the loan or negotiate with the lender. They will send a notice of default in this case. In some states, however, a lender may send a notice of default together with a notice of sale, or it may just send a notice of sale. A lender may simply need to issue a notice in the newspaper and post it on the property in some cases. If you have a legal defense to a non-judicial foreclosure, you must file a lawsuit in court to assert it. If you have a defense against judicial foreclosure, you would respond to the pre-existing litigation.
The bad news for families experiencing non-judicial foreclosure is that it may be a fairly quick procedure. It might end in a few months or perhaps sooner, so a homeowner should analyze their alternatives and look for a new house as soon as possible.