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Judicial and Non-Judicial Foreclosures |
When a home loan is originated, a security instrument is required to tie the note to the collateral, those security instruments will usually be a mortgage or trust deed. So, as part of the documents signed when a home is purchased, there will be a promissory note where the borrower promises to repay the money they have borrowed to purchase the property and the security instrument attaching the note to the collateral and also specifying what constitutes loan default.
Judicial foreclosures are normally conducted in states where a mortgage is used as the
security instrument. The foreclosure process begins with the lender filing a
complaint and a notice of Lis Pendens in the county where the property is located, these
will normally be filed with the circuit court. After the complaint and notice are
filed, all defendants must be notified of the court action by a process server, or in some
cases, by mail. After the service of process is complete, the lender will seek an
entry of judgment or summary judgment. The judgment will have the entire amount due
the lender and set a sale date for the property. Newspaper publication of the
upcoming sale will usually be required once a week for two or three weeks, then the
property will be sold at public auction either by a clerk of the court or a sheriff.
A certificate of sale will be issued by the court usually between a few days to a
few weeks after the sale. The certificate of sale transfers ownership of the
property to either the high bidder at the auction, or the lender if the lender was the
high bidder. It is important to note that each state has specific procedures and
timelines for this process that can be found in your state statutes.
Important Milestones:
Filing of Lis Pendens
Entry of Judgment
Newspaper Publication of Sale
Public Auction
Certificate of Sale
Non-judicial foreclosures are normally conducted in states using a deed of trust as the
security instrument. The process varies widely by state, with some states requiring
nothing more than publication of the Notice of Sale, others will require two or three
steps to complete the foreclosure process. In states where a Notice of Default is
used, the Trustee will usually record the Notice of Default along with mailing the notice
to the homeowner, wait through the statutory period for owner reinstatement, then record,
mail to the homeowner and publish in the newspaper a Notice of Trustee Sale. The
Notice of Trustee Sale will define the place of sale, the estimated opening bid, the
property address and the date and time of the sale. Auctions are held in a public
place, which can range from in front of the property being sold to the more common
locations of the local courthouse steps or civic areas. The successful bidder at the
auction will receive a Trustee's Deed to the property usually within 30 days of the sale.
It is important to note that each state has specific procedures and timelines
for this process that can be found in your state statutes.
Improtant Milestones:
Notice of Default
Notice of Trustee Sale
Newspaper publication of Sale
Public Auction
Trustee's Deed upon Sale
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Judicial and Non-Judicial Foreclosures |
