There are two types of foreclosure, judicial and non-judicial. Judicial foreclosure, as its name implies, is a court proceeding requiring the lender to get a court order authorizing the foreclosure before it can actually foreclose. Non-judicial foreclosure, on the other hand, requires no court order and allows a lender to foreclose in a relatively short period of time. Some states allow mortgage companies to utilize both judicial and non-judicial foreclosure. Other states allow only judicial foreclosure. Visit our Foreclosure Law section to see your states individual laws, time lines, and state specific information.
Non Judicial Requirements
Although the specific requirements for conducting non-judicial foreclosures vary from state to state, the general process is very similar across states. In states that allow non-judicial foreclosure, at the time he obtains the loan, the borrower must sign a security instrument (security deed, mortgage, or deed of trust) which includes a disclosure that the lender has the right to a non-judicial foreclosure in the event the borrower defaults on the loan. In most cases, the security instrument will contain specific requirements regarding how the sale will be conducted and the lender is obligated to conduct the sale according to the guidelines set forth in the security instrument. However, if the security instrument does not contain specific guidelines for how the sale will be conducted, the lender must conduct the sale in accordance with the guidelines set forth under the laws of the state in which the property is located.
In most instances, the first step in the foreclosure process, whether judicial or non-judicial, is the filing of a Notice of Default. Most states require the lender to mail a copy of the Notice of Default to the borrower via certified mail. The Notice of Default will indicate that the borrower has defaulted on the loan and it will give the borrower a specific date by which he must bring the loan current in order to avoid the commencement of foreclosure proceedings by the lender.
Non Judicial Foreclosure Proceedings
If the Debtor does not cure the default by the date specified in the Notice of Default, the lender will begin foreclosure proceedings. The lender must publish a Notice of Foreclosure, also called a Notice of Sale, in the legal organ, or any other publication authorized by law, in the county where the property is located. The laws pertaining to how long the notice must run and how far in advance of the foreclosure it must be published vary from state to state. Additionally, some state laws prescribe when the foreclosure sale must take place in relation to the last publication date of the Notice of Sale. The lender must also mail a copy of the Notice of Foreclosure to the borrower via certified mail.
The Notice of Foreclosure must specifically identify the property being foreclosed, the names of the mortgagors (borrowers), the original principal balance of the loan, and the recording information for the security instrument. Additionally, it must give the date, time and location of the foreclosure sale. Failure of a lender to comply with the notice requirements or to conduct the sale in accordance with state law may be cause to have the foreclosure sale set aside.
Non-judicial foreclosures are auction type sales that usually take place on the courthouse steps in the county where the property is located. The property is sold to the highest bidder and oftentimes, the lender is the highest bidder.
[1] State law specifies when foreclosure sales take place. In Georgia, for examples, a foreclosure sale can only be held on the first Tuesday of each month. In other states, foreclosure sales take place weekly or even daily.
