Types of Foreclosures Available: Judicial & Non-Judicial
Timeline: 30 – 60 Days (But may vary depending on individual cases)
Right of Redemption: Allowed, For 12 Months
Deficiency Judgment: Allowed
Deed of Trust/ Mortgage: Both are required as Security Instruments
Depending on whether power of sale exists in either mortgage or deed of trust, there are two types of foreclosures – Judicial & Non-Judicial.
Judicial Foreclosure process:
When ‘Power of Sale’ clause is not mentioned in the Deed of Trust or Mortgage documents, the lender (bank) can file a lawsuit to obtain a foreclosure order. But lenders can also choose not to avail this option and can foreclose the loan by selling the property by themselves. The guidelines for foreclosing when power of sale is not available, is given below.
Guidelines for foreclosing when power of sale is not available:
When the ‘power of sale’ clause is not available in the Deed of Trust/ Mortgage, the lender (bank) or their agents can file for a lawsuit to foreclose the loan. Alternatively, they can organize an auction at the courthouse door of the county where the property/ part of the property is situated.
Prior to the auction, they are required to publish the news of the auction for four consecutive weeks in a newspaper of that local county along with time, place, date and terms of auction. They can then organize the auction on the mentioned date / time and sell the property to the highest bidder to complete the foreclosure process.
Non-Judicial Foreclosure process:
When the ‘power of sale’ clause exists in the Deed of Trust/ Mortgage, the Non-Judicial foreclosure process is used. In this type of foreclosure, the borrower gives prior authorization to the bank (lender) to sell their property in case they default. The lender or their agent can sell the property to foreclose the loan according to the guidelines given below.
Guidelines for foreclosing when power of sale is available:
If the ‘power of sale’ mentions the place, time, period and other terms for the auction, then the guidelines need to be followed as mentioned in the document. But when such information is not mentioned in the ‘power of sale’ clause of the Deed of Trust/ Mortgage, an auction can be held (at least) after thirty days of sending the last notice of sale.
The auction generally happens in front of the main-door of the courthouse of the county where the property/ part of it may be located. The property is then sold to the highest bidder through a normal auction process.
The notice of sale must be advertised in a local newspaper of the county or all counties where the property is located for four consecutive weeks. If there is no newspaper in a particular county, then the advertisement should be carried on a newspaper of the adjacent county. The advertisement should clearly mention the date, time, place and all the other terms of the auction, along with details of the property.