Judicial and Non Judicial Foreclosure States

Which one is judicial foreclosure state and which one non judicial foreclosure state typically depends on the state foreclosure laws or codes involved. Each state decides how their counties will allow lenders to sell defaulted properties in foreclosure. Some allows lenders to sell directly without going through court procedure hereafter called a non judicial foreclosure and in some state following court procedures is mandatory is considered as a judicial foreclosure state. In some cases a non judicial foreclosure state may still follow court procedures to sell properties in foreclosure depends on the loan agreement whether lenders are allowed to perform a power of sale or not.

Judicial Foreclosure States:

Some states only allow lenders to perform foreclosure sales following a judicial procedures. In that case lenders must have to fulfill all the requirements set by the court to perform a foreclosure. Those requirements including, sending breach letter to homeowners or borrowers, filling lawsuit with court cases, allowing certain amount of time for the homeowners to answer, filling notice and orders of sale, setting an auction date and so on. There are currently 22 States in the US that allows only judicial foreclosures including:

Pros of Judicial Foreclosure:

Though it’s not a favorable way for lenders to use judicial foreclosure, it still have some pros. In judicial foreclosure, lenders can proceed with a deficiency judgment if their mortgage amount is not recovered by a foreclosure sale. Lenders investment is more secured than a non judicial foreclosure. It also have some beneficial use for the homeowners as well. In case of judicial foreclosure, a homeowner gets more time to answer as well as opportunity to loss mitigation, short sale, and loan modification. Sometime they can get help from government body as well to prevent their homes from being sold in foreclosure.

Cons of Judicial Foreclosure:

A judicial foreclosure takes longer time like six month to three years to take place that is definitely not good for investors and loan providers. On the other hand deficiency judgment is a negative sign for homeowners. If a judicial foreclosure sells the property less than the judgment amount, homeowners fall in further judgment for the remaining owed amount after paying from foreclosure sale proceeds.

Non Judicial Foreclosure States that Uses Power of Sale:

In some state lenders or loan providers can sell the defaulted property in foreclosure without paying attention to lawsuit or court procedures. In a non judicial state lenders are still be able to do a judicial foreclosure if required. In non judicial foreclosure state, the loan agreement contains a section called power of sale that determines how the property will be sold in foreclosure if gets defaulted. Though a non judicial foreclosure in no blessing for homeowners but it still have some outstanding benefits. In most of non judicial foreclosure area deficiency judgment is not acceptable that allows homeowners safe from further deficiency judgment if the selling price in auction is less than the judgment amount. There are currently 28 states that uses non judicial foreclosure or power of sale.

Pros of Non Judicial Foreclosure:

Non judicial foreclosure is more favorable for lenders because of its less legal procedures and short duration of selling time. It’s also favorable for homeowners for not having deficiency judgment option in most of non judicial foreclosure states.

Cons of Non Judicial Foreclosure:

Though it takes less time for the lenders or investors to perform a non judicial foreclosure, it risks their investments not recovered from the foreclosure sale. The property may get sold in auction for less than the loan or judgment amount and lenders have nothing to do with the remaining dues in most of the non judicial states.