Before learning more about the differences between a non-judicial foreclosure and a judicial foreclosure, it can be useful to have an understanding of what the term “foreclosure” means first. Basically, foreclosure is a legal process in which a lender (e.g., a bank) takes possession of a home when its owner (e.g., a borrower) fails to keep up with the mortgage payments.
After the borrower misses a number of payments, the lender can foreclose on the home. This means that the lender will legally be permitted to seize the home from its owner and may sell it to recover the missing payments and any remaining debt still owed on the mortgage.
In general, there are two main types of foreclosures: a non-judicial foreclosure and a judicial foreclosure. A non-judicial foreclosure, also known as a “foreclosure by power of sale”, is a foreclosure that does not involve or require a court to intervene in the process. Instead, a non-judicial foreclosure will allow a lender to sell the borrower’s property to recover any financial losses like missed mortgage payments.
However, not every state permits lenders to partake in the non-judicial foreclosure process. In states that do recognize non-judicial foreclosures, the process must directly correspond with what is agreed to or written in the borrower’s mortgage documents.
In contrast, lenders who conduct business in states that do not allow non-judicial foreclosure sales, such as Arkansas, New York, and Vermont, must adhere to state statutes and complete the foreclosure process through a court.
If you need further information about the type of foreclosure process that occurs in your state or require assistance with a foreclosure issue, then it may be in your best interest to consult an experienced real estate attorney in your area for help. An attorney will be able to provide guidance on your matter and can assist you in navigating the kind of foreclosure process that is available in your jurisdiction.
What Is a Judicial Foreclosure?
Unlike a non-judicial foreclosure, the judicial foreclosure process requires court intervention. The court will typically intervene by imposing a judicial lien on the property in question and by subjecting it to a judicial sale. The proceeds from the judicial sale will then be paid to the mortgage company or lender to make up for the borrower’s missed payments on the property. In other words, the court will essentially be tasked with monitoring the home sale process.
Judicial foreclosure, also referred to as “foreclosure by judicial sale”, is available in all fifty states. In fact, judicial foreclosures are the required and preferred method of foreclosure in the majority of states. As such, if a state does not recognize non-judicial foreclosure sales, then a judicial foreclosure will be the default process assigned to a property.
In addition, foreclosure by judicial sale is usually ordered by a court in cases where the debt on a specific property cannot be resolved. They are also ordered if the property owner is insolvent and cannot afford to continue making mortgage payments to their lenders.
Generally speaking, the proceeds from a judicial foreclosure sale will first go towards satisfying the original lender, with any leftover proceeds going to second lien holders and in some cases even back to the borrower.
For example, imagine that a property owner could not afford a particular home without taking out a mortgage loan from both a bank and a second lending institution. Although this is primarily contingent on various state laws, legal procedures, and an individual’s circumstances, a bank will normally be the first or original mortgage lender in this scenario.
Thus, the bank would recoup the proceeds from the judicial foreclosure sale. Any remaining amounts after the bank is fully paid off would go to the second lending institution and then the property owner, assuming that all other debts are satisfied.
What Are the Differences Between Judicial and Non-Judicial Foreclosure?
There are many differences between judicial and non-judicial foreclosure sales. Aside from the fact that not every state recognizes foreclosures by power of sale, non-judicial foreclosures do not require a court to intervene in the process. In general, this means that non-judicial foreclosures are typically quicker and do not use as many resources in order to complete a sale.
On the other hand, judicial foreclosures or foreclosures by judicial sale, will usually take much longer than non-judicial foreclosures since they do require a court to intervene in the process. This means that the parties will have to file a lawsuit with the proper court, present substantial evidence, and wait until the court issues a decision on the matter. Accordingly, judicial foreclosures will typically last much longer and use more resources than a judicial foreclosure.
In addition, a foreclosure by judicial sale is considered both final as well as enforceable by law. This makes it harder for a borrower to contest the foreclosure sale or to persuade a court to appeal its decision. This is just one of the many reasons that makes judicial foreclosure sales that much more appealing to lenders.
However, there is one reason that a borrower might prefer to be involved with a judicial foreclosure sale and that is so that a court oversees the sale, which in turn, may be able to prevent any instances of mortgage fraud.
One last difference between judicial and non-judicial foreclosure sales is that a lender using the foreclosure by power of sale process may need to send a notice of default and notice of sale to the trustee. They may also be required to publish notice of the sale in a newspaper or some other source of public news depending on the laws of the state.
In contrast, the court will issue a decision about a foreclosure by judicial sale and thus no public announcement will be necessary. The trustee or property owner will need to receive notice of default and/or notice of sale though in accordance with the proper legal procedures in the state.
Do I Need a Lawyer for Assistance With Non-Judicial Foreclosure?
As discussed above, the laws and legal requirements for both judicial and non-judicial foreclosures will vary according to state laws. This fact can sometimes complicate matters; especially, in cases where a lender is foreclosing upon multiple properties that are all located in different states.
Therefore, if you need assistance with a non-judicial foreclosure or have questions about a foreclosure by power of sale, then you should contact a local foreclosure attorney about the matter as soon as possible. A local and experienced foreclosure attorney will already be familiar with the foreclosure laws in your area and can help you navigate the non-judicial foreclosure process.
Your attorney will also be able to spot any instances of mortgage fraud and can make sure that your rights as a property owner are not being violated by your lenders. In addition, your attorney can also try and stop your house from being foreclosed on by your lenders and can assist you in filing any relevant legal documents in court to prevent a non-judicial foreclosure from happening.
Finally, if you have any questions or concerns about a foreclosure by power of sale, your attorney can offer accurate legal advice regarding your foreclosure issue. Also, should a dispute arise over a non-judicial foreclosure, your attorney will be able to provide representation in court as well.