If a lender proceeds with a foreclosure on your home, it may be able to choose between a judicial foreclosure and a non-judicial foreclosure. Essentially, a judicial foreclosure means that the lender goes to court to get a judgment to foreclose on your home, while a non-judicial foreclosure means that the lender does not need to go to court. Every state allows a lender to get a judicial foreclosure, but not every state provides procedures for a non-judicial foreclosure. The difference between these processes can have an impact on how a homeowner makes a defense to a foreclosure, if any applies. It also can affect the timeline of the process and how swiftly you need to move if you cannot prevent the foreclosure.
Each state’s procedures are somewhat distinctive, though, so you may want to seek specific guidance on the laws of your state if you are facing a foreclosure. This may involve talking to a housing counselor approved by the U.S. Department of Housing and Urban Development (HUD) or consulting a foreclosure attorney.
The lender will bring a lawsuit in court, and a judge will review the evidence submitted by both sides. They may hold a hearing to decide whether the homeowner is in default on the loan. The homeowner can try to reach a settlement with the lender before the hearing to prevent the foreclosure. If the parties cannot reach a settlement, and the court finds in favor of the lender, the court will enter a judgment of foreclosure. This will trigger a foreclosure sale and may expose the homeowner to a deficiency judgment for any remaining balance of the loan not covered by the sale.
Some homeowners may be reassured to know that this process can take a long time. They may be able to delay a foreclosure for close to a year, or possibly even more than a year. This can give a homeowner time to repair their finances and develop contingency plans.
Even if the more efficient process of a non-judicial foreclosure is available, a lender may prefer to pursue a judicial foreclosure in some circumstances. This allows it to resolve complex issues related to the property, such as a dispute over title.
The lender will not go to court at the start of the process but will pursue a foreclosure with the assistance of a foreclosure trustee. This is a neutral third party that may be listed in the deed of trust attached to the home. (Read more here about the role of a foreclosure trustee.) The process of a non-judicial foreclosure varies more widely from state to state than the process of a judicial foreclosure.
Sometimes the lender or the trustee will give the homeowner time to catch up with the missed payments on the loan, or negotiate with the lender, before proceeding with a foreclosure. In this situation, they will send a notice of default. However, in other states, a lender might send a notice of default together with a notice of sale, or it might send only a notice of sale. Sometimes a lender only needs to publish notice in the newspaper and post it on the property. If you have a defense to a non-judicial foreclosure, you will need to file a lawsuit in court to raise the defense. By contrast, you would respond to the pre-existing lawsuit if you have a defense to a judicial foreclosure.
The bad news for homeowners facing a non-judicial foreclosure is that the process can move very efficiently. It may conclude within a few months or even sooner, so a homeowner should take prompt action in assessing their options and finding a new home if needed.