There are two methods of foreclosure that your lender can use to foreclosure on your property- judicial foreclosure and non-judicial foreclosure (Trustee Sale). State law dictates which method your lender may use to institute foreclosure proceedings. Some states allow both methods depending on what language is contained in the mortgage or deed of trust.
How the Foreclosure Process Works?
If you do not bring your mortgage current or find another solution with your lender to stop the foreclosure, then your home will be sold at a public foreclosure auction whether your lender institutes a judicial process or non-judicial process. The highest bidder is awarded the property for cash. Properties that do not sell at judicial or non-judicial foreclosure auctions become bank-owned REO properties. REO properties are listed with local Realtors and advertised in the MLS.
The judicial process works as follows:
- Lender files a lawsuit (lis pendens) against you in court in the county where your property is located, serving you and all interested parties with a copy of the foreclosure complaint. The lender must prove you defaulted on your mortgage.
- You have an opportunity to fight the foreclosure in court by answering the complaint.
- Prior to the foreclosure sale, the lender must give you and all interested parties a copy of the notice of sale, publish a copy of the notice in a newspaper of general circulation in the county where your property is located and place a copy of the notice at the property or post it in a public place.
- The foreclosure auction is conducted on the courthouse steps by the sheriff or an auctioneer. After the sale, the court must approve the sale terms.
- Your lender may be able to collect a deficiency judgment against you after the foreclosure for the difference between the foreclosure auction sale proceeds and the amount you owe your lender.
The non-judicial process works as follows:
- The lender must commence the proceedings by recording a notice of default with the County Recorder’s Office in the county where the property is located and sending you and all interested parties a copy.
- You have the right to defend yourself by filing an action with the court.
- Prior to the foreclosure sale, the lender must give you and all interested parties a copy of the notice of sale, publish a copy of the notice in a newspaper of general circulation in the county where your property is located and place a copy of the notice at the property or post it in a public place.
- A private trustee foreclosure sale is conducted at either the property location or some other designated location. The property is awarded to the highest bidder.
- No court approval is required.
Any property subject to an IRS tax lien requires the lender to take additional procedures.
Redemption Periods
Not every state allows the borrower to redeem the property after a foreclosure sale by paying the default amount, including any fees and costs. You need to check your state laws because laws vary in each state. You can redeem your property prior to the foreclosure sale.
Help from an Attorney
It is recommended that you obtain help from a foreclosure defense attorney if your lender has instituted judicial or non-judicial foreclosure actions against you. The attorney is an expert at foreclosure laws and foreclosure defenses. An attorney can assist you with negotiations with your lender to help save your home from foreclosure.
