how does foreclosure work? What is the mortgage foreclosure
process? Here are the steps for judicial and non-judicial foreclosure
that you must know before taking any
action to resolve your situation.
When you find yourself in financial trouble and are starting
to panic about your situation, the best thing you can do is educate
yourself on what you are fearful of so you can tackle the
the most rational and logical process.
It's hard to remain calm and detached from fear when you may be losing
your home, but that is exactly what you need to do!
Foreclosure is one of the most
emotional and stressful
anyone can face, but if you can keep the emotions and fear at bay while
you figure out what course of action to take, you will be able to
execute your best
and have a greater
chance of saving your home or your
equity, (not to mention your sanity and dignity)
your objective may be. Really.......I did it and so can you!
Your first step is to find out...how does foreclosure work and exactly
what is the mortgage foreclosure process...
2 Kinds of Foreclosure
Before you scroll down to read how does
foreclosure work in both the judicial and non-judicial processes, you
need to know which one is used in your
state for filing foreclosures
This is important because the
process is widely different from state to state with regards to
time frames and procedures used. Many people do not know this
information and are
led the wrong path and waste precious time they couldn't afford to lose
while searching for solutions.
To find out the
deed of trust or mortgage foreclosure process used in your state, go to
Foreclosure Law - All States
and click on your state to see what laws apply to you.
process used in all states -- Judicial or Non-Judicial
- Type of
instrument - a Deed of Trust (aka Trust Deed) or
a Mortgage --used to secure the debt on your real property
- First Public
Notice - the type of first notice made public by the
foreclosing lender to initiate the foreclosure process
- Time Frame
- the amount of time it takes from the first public notice until the
scheduled public auction sale
Period - the amount of time the borrower is allowed to
redeem or purchase back the property after it is sold at the public
Judgment - depending on your state, the lender may be able
to file a lawsuit
against you and receive a judgment if the proceeds from the public
auction does not cover the entire loan amount
I. Judicial Foreclosure
does foreclosure work in a Judicial process?
foreclosure process that is initiated through the court
It takes more time and costs more money so lenders
generally do not prefer this route unless they must do so according to
the laws where the property is located.
1: Judicial foreclosure starts when the lender files a complaint and
a notice of Lis Pendens. The formal complaint
includes details of
the debt along with an explanation why the lender should be allowed to
foreclose and take possession of the collateral (your property) which
was given as security when you first took out the loan.
will be served the notice
of complaint by mail, an individual server,
or publication of the notice. You will, however, have the
opportunity to be
heard before the court so you
can object to the complaint against you.
Be sure to respond to the notice within the specified period
because failure to do so will result in a default judgment by the court
in favor of the lender and will give the lender authorization to
foreclose on your property.
3: If the court rules that your debt is
valid and that it is in fact defaulted, a judgment will be issued for
the entire amount you owe, plus the costs of the judicial foreclosure
4: Once the judgment is entered, the court
issues a writ to authorize a
sheriff's sale of
your property. The property is published for sale for a
number of days (varies from state to state). The sheriff's
is basically a public auction at a public place (it could be at the
courthouse steps or even in front of the property). The
bidder will become the property's new owner, subject to court
5: A sheriff's
is created and delivered to the highest bidder. Lastly, the
is then recorded (within a certain number of days) to finalize the new
ownership. If no one bids at the sheriff's sale, the lender "bids in"
for the amount owed and is given the sheriff's deed.
redemption period, if available in your state, gives you
an opportunity to buy
back your property
within a specified amount of time (varies state to state).
will be required to pay the sale price plus interest on the mortgage.
You may also have to reimburse the buyer for any payments
made for property taxes, insurance, legal fees, and any other provable
and qualifiedd expenses incurred.
7: If you are not able to buy back your
property by the time the redemption period expires, the buyer will
serve you with an eviction
order (also known as a writ of restitution), forcing you
to vacate so they can then take possession of the property.
You) of a Judicial Foreclosure
- The lender
HAS to sue,
which means they have to file a complaint and serve you, and then the
court has to review the filing. This takes time!
And if the
courts have a huge backlog, you just bought yourself more time to act.
- The lender
has to hire an attorney
to represent them in court. The attorney has to attend the
proceedings, make the motion before the judge, and argue as to how and
why the lender finds you in default. This multi-stepped
opens the lender up for mistakes
and loopholes which you can use to your advantage.
- You or your attorney have the opportunity to show up in
court and challenge the
judgment for the purpose of buying more time to find a
solution. You can present a
and convince the judge to want to hear and see more evidence.
Your hope is to get another court date. It'll take
get back on the court's calendar and you may just have bought yourself
more time. (Note:
The most common challenge borrowers make is if the bank has a
history of accepting late payments in the past and now refuses to do so
without notifying the borrower of the change in policy --
could invalidate their right to foreclose). It is very
that you must consult with an experienced foreclosure attorney to
- If your property is in a state with a redemption period, the
bank has to wait even longer to recover its losses because
it cannot sell the property until the redemption period expires (varies
from state to state). Some people use the redemption period
to live rent-free in the property.
II. Non-Judicial Foreclosure
does foreclosure work in a NON-Judicial process? As
the name says, this type of foreclosure does not go through the
judicial or court system. It does not require court
intervention in order for the lender to proceed with the foreclosure
process. It is a simpler
process than judicial foreclosure.
At the time you purchased your property, you signed a Promissory Note ( or
more commonly known as the note), which was secured by either a "mortgage" or
a "deed of trust" also known as trust deed. The
note is your promise to pay back the loan to the lender under the terms
and conditions you agreed to.
The mortgage or the deed of trust is the security instrument used to
guarantee the promissory note. Whichever
document is used, the purpose of both types of documents is to secure
the note and protect the lender.
Click here to
learn the difference between a Mortgage vs Deed of Trust.
- STEP 1: When
you start missing your loan payments, you are said to be in default.
If you do not reinstate your loan and become current on your
loan payments again, the lender will file a Notice of Default,
which is recorded at your county recorder's office. Note: The
lender can file a Notice of Default from the first payment you miss,
but in reality, most lenders wait a few months before they file it.
IMPORTANT: Each state
who practices non-judicial foreclosure has different procedures. Some states do not
require a Notice of Default, but start with a Notice of Sale right away.
Others only need to make a publication of the Notice of Sale
to give public notice, without being required to notify the property
owner. Again, you will need to know the exact procedure and foreclosure law for
- STEP 2:
After a certain amount of time specified by your state law (ex: In
California, the Notice of Default period lasts 90 days, meaning you
have the ability to reinstate your loan within that period).
After the Notice of Default period expires, the lender files a Notice of Sale
(also known as Trustee Sale Notice). A date is
in California, the Notice of Sale period is 21 days, meaning your sale
date is 21 days after the Notice of Sale is filed) for the sale of your
property at a public auction. You are notified through
regular and certified mail, and in some cases, a notice tacked on or
near your front door.
3: The lender is required to publicly advertise their intent
to foreclose within a certain number of days or weeks
before the auction sale date. The Notice of Sale is usually
advertised in the local newspaper in the county where the property is
located and /or in a legal newspaper. This varies in every
state, so again, please check the spreadsheet for information on your
- STEP 4:
(Auction) - The sale takes place most often at
the courhouse steps. It varies by state who conducts the
auction in non-judicial states. Most often it is an
from a third party auction company. The highest bidder
becomes the new owner of the property, subject to the deed being
recorded and delivered to them. Bidders at non-judicial
foreclosure trustee sales generally are required to pay cash or cash equivalent
for the entire amount either at the time of the sale, or very shortly
after. The auctioneer checks that each bidder has the cash
they can place their bids.
- You will have the opportunity to buy back your property if your state
allows a redemption period. Just as with judicial
above, you will have to pay the price paid at auction, plus any
qualified fees and expenses paid by the auction buyer. Please
period information on the state
foreclosure laws page.
Do not hesitate to contact us
via email if you have additional questions you would like answered or
any comments on the deed of trust or mortgage foreclosure process....or
just how does foreclosure work in general. We will do our
respond as soon as we receive your query.
Foreclosure Law - All States