Judicial/ Non-Judicial Foreclosure: Judicial & Non-Judicial Foreclosure
Right of Redemption / Deficiency Judgment: Yes / Yes
Timeline: Can vary, depending on individual cases
Deed of Trust / Mortgage as Security Instruments: Deed of Trust, Mortgage
Judicial Foreclosure process:
In the Judicial foreclosure process, the lender is required to file a lawsuit against the borrower in a courthouse belonging to the same county where the property is located. The courthouse then checks for the default and if the same is confirmed, the court first gives some time for the borrower to pay up all their dues along with interest costs. If the borrower does not pay within the time period set up by the court, it authorizes the foreclosure process to begin where the property is sold in a similar way to normal execution sales process.
Non-Judicial Foreclosure process:
If a power of sale clause exists in the Deed of Trust / Mortgage documents, the Non-Judicial foreclosure process is followed. The power of sale clause authorizes the borrower or their authorized representative (referred to as Trustee) to conduct the foreclosure proceedings, in case the borrower happens to default on their mortgage payments. The following guidelines may be followed for the same.
If the power of sale clause contains the time, location and other foreclosure terms to be followed, the same is followed as such. Otherwise, the following procedure is followed.
A notice of sale should be prepared and the same needs to be pasted somewhere on the property and also in the recorders office of the county where the property is located. This notice should be pasted at least twenty days before the foreclosure sale date.
The notice of sale should also be advertised in a local newspaper where the property is located at least for one day in each week, for three consecutive weeks. The last advertisement should appear between 10 – 30 days before the actual foreclosure sale date.
The foreclosure sale is held between 8 AM and 5 PM on business days and the venue of the foreclosure sale should be mentioned in the above notice.
Even after the property is sold off to the highest bidder through a foreclosure sale, the borrowers have a certain period of time until which they can reclaim their property by paying up all their dues, as per their right of redemption. This right of redemption period varies depending on the court’s ruling and can be extended by the court if requested by the borrower.
The lender can also file for deficiency judgment against the borrower if they find that the value offered by the highest bidder is less than the total amount owed to them by the borrower. The lender may seize the property until all their dues are recovered.