Types of Foreclosure

There are two common types of foreclosure used in the United States: Judicial Foreclosure and Non-Judicial Foreclosure.

 

Judicial Foreclosure

Judicial foreclosure is allowed in all states, and occurs when the lender files a civil lawsuit against the borrower, with the entire process being handled by the court. Judicial foreclosures can be further divided into two types: foreclosure by sale, and strict foreclosure. Foreclosure by sale requires the home to be auctioned to the highest bidder with the lender placing the first, or opening, bid. These auctions are commonly referred to as sheriff sales. In a strict foreclosure, the court sets a date by which the owner must pay the mortgage, and if the owner fails to pay, the court awards ownership of the home to the lender with no auction taking place.

The judicial foreclosure process begins when the lender files their lawsuit, at which time they also file a lis pendens (LIS) on the property. The lis pendens is a document recorded with the County Recorder’s office, to let potential buyers, lenders, and others know of the pending foreclosure lawsuit. A second notice, the Notice of Foreclosure Sale (NFS), is typically filed once the court has set the auction time and bid amount.

 

Non-judicial Foreclosure

The non-judicial foreclosure process allows a lender to advertise and sell the property at a public auction, without court involvement, by following a process specified by the state. As the process is laid out in state laws, or statutes, the non-judicial foreclosure process is sometimes also referred to asStatutory Foreclosure. A key requirement for non-judicial foreclosure is that the borrower agreed to the process when they took the loan. To accomplish this, a power of sale clause is added to the mortgage, or deed of trust, which gives a third-party trustee the right to sell the property in the event the borrower does not make their payments. Given this clause, non-judicial foreclosures are sometimes referred to as foreclosure by power of sale.

In most non-judicial foreclosure states, the foreclosure process is started when the lender files a Notice of Default with the County Recorder’s office, putting the homeowner and anyone else who is interested on notice that the loan may be foreclosed on. A second notice, the Notice of Trustee Sale is typically filed 30 to 120 days later, depending on the state; and sets the auction date and time. In a few states, only the Notice of Trustee Sale is recorded.

 

Important Notes

There are two important things to keep in mind about both foreclosure processes:

  1. Foreclosures happen to loans, not properties. As such, it is quite possible to have more than one active foreclosure on a single property at the same time. More importantly, buying a foreclosure at a state mandated auction doesn’t necessarily mean that you have purchased the property free and clear of other liens. For example, the buyer of a foreclosure is almost always responsible for any past due property taxes.
  2. Foreclosure laws vary a great deal by State. One should never assume that anything they learn about the foreclosure laws of one state will apply to another.
State Foreclosure Type Number of Months Deficiency Judgment Redemption Period
Alabama Nonjudicial One Allowed One Year
Alaska Nonjudicial Three Allowed None
Arizona Nonjudicial Three Allowed None
Arkansas Judicial Four Allowed None
California Nonjudicial Four Prohibited None
Colorado Nonjudicial Two Allowed 75 Days
Connecticut Strict Five Allowed None
Delaware Judicial Three Allowed None
Dist. of Col. Nonjudicial Two Allowed None
Florida Judicial Five Allowed None
Georgia Nonjudicial Two Allowed None
Hawaii Nonjudicial Three Allowed None
Idaho Nonjudicial Five Allowed None
Illinois Judicial Seven Allowed None
Indiana Judicial Five Allowed Three months
Iowa Judicial Five Allowed Six months
Kansas Judicial Four Allowed Six Months-One Year
Kentucky Judicial Six Allowed None
Louisiana Exec.Process Two Allowed None
Maine Judicial Six Allowed None
Maryland Nonjudicial Two Allowed None
Massachusetts Judicial Three Allowed None
Michigan Nonjudicial Two Allowed Six Months
Minnesota Nonjudicial Two Prohibited Six Months
Mississippi Nonjudicial Two Prohibited None
Missouri Nonjudicial Two Allowed None
Montana Nonjudicial Five Prohibited None
Nebraska Judicial Five Allowed None
Nevada Nonjudicial Four Allowed None
New Hampshiree Nonjudicial Two Allowed None
New Jersey Judicial Three Allowed 10 Days
New Mexico Judicial Four Allowed None
New York Judicial Four Allowed None
North Carolina Nonjudicial Two Allowed None
North Dakota Judicial Three Prohibited 60 days
Ohio Judicial Five Allowed None
Oklahoma Judicial Four Allowed None
Oregon Nonjudicial Five Allowed None
Pennsylvania Judicial Three Allowed None
Rhode Island Nonjudicial Two Allowed None
South Carolina Judicial Six Allowed None
South Dakota Judicial Three Allowed 180 Days
Tennessee Nonjudicial Two Allowed None
Texas Nonjudicial Two Allowed None
Utah Nonjudicial Four Allowed None
Vermont Judicial Seven Allowed None
Virginia Nonjudicial Two Allowed None
Washington Nonjudicial Four Allowed None
West Virginia Nonjudicial Two Prohibited None
Wisconsin Judicial Varies Allowed None
Wyoming Nonjudicial Two Allowed Three Months

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