Judicial/ Non-Judicial Foreclosure: Judicial & Non-Judicial Foreclosure
Right of Redemption / Deficiency Judgment: Yes / Yes
Timeline: 60 Days, Can Vary depending on individual cases
Deed of Trust / Mortgage as Security Instruments: Deed of Trust, Mortgage
Judicial Foreclosure process:
A Judicial Foreclosure process involves the lender filing a lawsuit against the borrower, if the latter defaults on their mortgage payments. In this process, the court verifies for the default and issues a decree of sale, if the default from the borrower’s side is confirmed. Before issuing the decree of sale, the borrower is given some time to pay all their dues (including interest charges, if any). In case they are not able to do so within the given time period, the court orders for the foreclosure process to begin.
Non-Judicial Foreclosure process:
A Non-Judicial foreclosure process can be followed if there is a power of sale clause in the deed of trust/ mortgage documents. The power of sale clause authorizes the lender or their authorized representative (known as Trustee) to carry out the foreclosure proceedings in case if the borrower defaults on the mortgage loan. The following guidelines can be followed for the same.
If the power of sale clause contains the time, location and other foreclosure terms, the same can be followed. Otherwise, the following procedure is followed.
A notice of foreclosure is prepared and the same is required to be advertised in a local newspaper available in the county at least on three different dates prior to the foreclosure sale. The first ad should appear twenty days before the actual sale date.
If there are no local newspapers available in the county (where the property is located), the above mentioned notice should be pasted on the courthouse door and in the neighborhood of the property, at least 30 days before the foreclosure sale date. In addition to this, the same notice should be pasted in at least five public places around the county.
The foreclosure sale notice should also be sent to the borrower if they are in possession of the property and are living there. This notice should be sent at least 20 days before the foreclosure sale date.
The sheriff of the county coordinates for the foreclosure sale and he can set a minimum price for the sale of the property. The minimum price that a property could be sold for, is generally fixed at a rate that is higher than 50% of the fair market value of the property.
On the day of the foreclosure sale (which can be held on business days between 10:00 AM and 4:00 PM), the property is sold off to the highest bidder who needs to offer the agreed value in cash.
The highest bidder does not get a title transfer immediately as the borrower has a certain period until which they can re-claim the property by paying up all their dues, using their right of redemption. So, the highest bidder gets a certificate of sale immediately but gets a proper deed transfer later on, after the borrower’s redemption period ends.
In case the borrower’s right of redemption has not been excluded in the mortgage/ deed of trust document, they are entitled for redeeming their property (by paying up all their dues) for up to two years after the sale date.