Whether you are a buyer who is interested in buying foreclosed property, or a seller wanting to sell a foreclosure property, or for that matter a foreclosure victim, understanding the foreclosure process and various aspects associated with it is very necessary.
The foreclosure process is actually initiated when the borrower is unable to keep up with his mortgage payment or technically speaking, when the borrower defaults on loan or mortgage payment. The foreclosure process can be either judicial or non-judicial. The foreclosure process between two states within the country may not be the same. There are some states in USA, where the foreclosure process is entirely judicial. While certain states have an entirely non-judicial foreclosure process. However states such as California, Georgia, and Texas have both judicial and non-judicial foreclosure process.
The basic differentiation between a judicial foreclosure process and a non-judicial foreclosure process is that the former one involves a court action while the latter does not. Thus in case of a judicial foreclosure process, the lender has to file a lawsuit and obtain a court order. It is only then that he can initiate the foreclosure process. In case of the judicial foreclosure process, the lawsuit has to be filed in the county court of the concerned area. Before taking legal action, the lender will first try to resolve matter with the borrower by exploring alternative options. However, in a situation where matter doesn’t get resolved, the lender will go for a court action.
In case of a judicial foreclosure process, the lender must file a complaint and a notice of Lis Penden (i.e. suit pending) in the court. On having done that the defaulted borrower will be notified about the complaint, and the lender will seek a judgment. Once the court declares a foreclosure, a date will be set for the sale of the property. The property is sold off by the auction procedure. Generally the Sheriff at the steps of the county court house conducts the auction.
A non-judicial foreclosure process takes place in those states where the property is purchased using a deed of trust, which contains a “power of sale clause”. As per this clause in a situation where the borrower defaults on his mortgage payment, so as to recover the amount, the lender is pre-authorized to sell off the property.
Thus what actually happens in a non-judicial foreclosure process is that when the borrower defaults on his mortgage payment, the lender or lender’s representative issues a notice of default and also notifies the borrower. If the borrower does not respond to this notice the foreclosure procedure is initiated, and eventually the property is sold off.
