Judicial Versus Non-Judicial Foreclosure

Judicial Versus Non-Judicial Foreclosure
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Judicial Versus Non-Judicial Foreclosure

In many discussions about mortgage foreclosures the terms judicial and non-judicial foreclosure are used. They involve very different processes. These terms refer to how individual states handle real estate foreclosure. Under both systems, time frames and terms vary widely from state to state. The following is a brief, general description of both processes. The accompanying chart (see last page) depicts the varying time frames involved in the judicial foreclosure process.
Judicial Foreclosures
A judicial foreclosure is a court proceeding that begins when the lender files a complaint and records a notice in the public land records announcing a claim on the property to potential buyers, creditors and other interested parties. The complaint describes the debt, the borrowers default and the amount owed. The complaint asks the court to allow the lender to foreclose its lien and take possession of the property as a remedy for non-payment. The homeowner is served notice of the complaint, either by mail, direct service or publication of the notice. The defendant (borrower) is permitted to dispute the facts (such as show that payments were made), offer defenses or present counterclaims by answering the complaint, filing a separate suit, and / or by attending a hearing arranged by the court. If the defendant shows there are differences of material facts, a trial will be held by the court to determine if foreclosure should occur. In the vast majority of cases, however, the foreclosure action is undisputed because the borrower is in default and cannot offer facts to the contrary. If the court determines the homeowner did default and that the debt is valid, it will issue a judgment in favor of the servicer for the total amount owed, including costs for the foreclosure process. In order for the judge to determine the amount of the judgment, the servicer submits paperwork through an affidavit that itemizes the amounts due.
Twenty two states use judicial procedures as the primary way to foreclose. These include: Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin. In all other states, foreclosure is usually handled by attorneys who follow a state-provided process. In the mortgage documents, borrowers give lenders the power of sale outside of judicial process in the event of an uncured default. Documentation or affidavit issues are not common in these states because of the non-judicial nature of the process.
Next, the court will authorize a sheriffs sale. The sale is an auction of the property open to anyone, and must be held in a public place. Procedures for a sheriffs sale in each locality differ, but the individual with the highest bid is granted the property. After the sale is confirmed by the court, the deed, which transfers ownership, is prepared, recorded and the highest bidder becomes the owner of the property. In most cases, the highest bidder is the servicer, who takes title of the property. The servicer then can sell the property. At this point, it is called real estate owned (REO).
Non-Judicial Foreclosures
The requirements for non-judicial foreclosure are established by state statute; there is no court intervention. When the default occurs, the homeowner is mailed a default letter and in many states a Notice of Default is recorded, at or about the same time. The homeowner may cure the debt during a prescribed period; if not, a Notice of Sale is mailed to the homeowner, posted in public places, recorded at the countys recorders office, and published in area newspapers / legal publications. When the legally required notice period (determined by each state) has expired, a public auction is held and the highest bidder becomes the owner of the property, subject to recordation of the deed. Prior to the sale, if the borrower disagrees with the facts of the case, he or she can try to file a lawsuit to enjoin the trustees sale.
Judicial Foreclosure Process

480-700 Days 180400 Days
Pre-Foreclosure
In-Foreclosure
Po s t- F o r eclo s u r e
1180 Days
180220 Days
180+ Days
Customer Outreach
Date of Default
Initiate Foreclosure Process

Date the borrowers mortgage case is referred to a foreclosure attorney by the servicer. Date the servicer or its attorney files a complaint (lawsuit) against the borrower to seek foreclosure as a remedy for non-payment. Date court decides to alow the property to be sold through foreclosure.
Filing
Court Approval
Transfer Date
Eviction
REO Marketing and Sale

Date the borrower is evicted from the property if they do not leave voluntarily before this time. Date the repossessed property (real estate ownedREO) begins to be marketed for sale and the date the property is sold by the servicer.
Beginning within a month of a missed payment and all the way to title transfer, a mortgage loan servicer exhausts all home retention options, including outbound calls and solicitations to educate the customer on alternatives to foreclosure.
Date the borrower is considered to have defaulted under the mortgage contract due to non-payment.
Date the foreclosure sale is completed by transferring title to the property from the borrower to the servicer or other highest bidder at the foreclosure sale.
Customer Outreach / Homeownership Preservation Efforts Continue
Borrower In Home
Day counts represent national average.

Judicial Versus Non-Judicial Foreclosure

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Judicial Versus Non-Judicial Foreclosure

Judicial Versus Non-Judicial Foreclosure

Judicial Foreclosure Process

Initiate Foreclosure Process

REO Marketing and Sale

Customer Outreach / Homeownership Preservation Efforts Continue

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