What is non-Judicial Foreclosure?

 

Non-judicial foreclosures are those in which the courts do not administer the foreclosure proceedings.  They are typically available in states that offer deeds of trust as opposed to notes and mortgages.  

A deed of trust (DOT) is a promise to repay a loan. That security is the home on which the DOT is placed.  As a part of the DOT, in the event of default, the lender has the ability to take back the pledged collateral and sell it or auction it to recoup their investment, the loan. That process is the non-judicial foreclosure process.  

In contrast, a judicial foreclosure is one where the lender has to apply for a court order to be able to repossess the house and then sell it or auction it. The process is administered by court officers and certain limitations are places on the lender in terms of how they handle the repossession and what rights the tenant or owners of the homes have.

In addition, lenders who obtain non-judicial foreclosures may not obtain deficiency judgments to recover money that may not have been recovered if the sale of the property does not amount to the principal balance still owed to the lender.

State law governs whether foreclosure is judicial, or non-judicial. With non-judicial foreclosures, because the lender does not have to go through the court process, states typically impose a stricter process on lenders in terms of how much notice they must give the borrower/home-owner, and how long they must wait before they can sell or auction the home.