Non-Judicial Foreclosure Process is generally shorter and involves less steps than a Judicial Foreclosure Process as it bypasses the courts and the lawsuits. In states that allow the usage of non-judicial process to foreclose on mortgage and deed of trust loans, the foreclosing lender invokes the Power Of Sale clause when a borrower defaults on mortgage payments. Deed of trusts typically allow for non-judicial foreclosure sale, but not always.
Power of Sale covenant present in mortgage or deed of trust gives the lender or the trustee the right to foreclose the loan in default by filing a notice of default with the county or public recorder’s office. Once the notice is filed, the lender or trustee is required to follow statutory steps related to advertising the auction/sale of the property. Most of the non-judicial foreclosure states provide for redemption of the foreclosed homes under most circumstances. This makes up for the short and expedited pre-foreclosure process.
Steps involved in the non-judicial foreclosure of a residential property :
- Borrower is at least 30-90 days (2-3 months) behind on their mortgage payments.
- Trustee/Lender files a notice of default with the county.
- The pubic sale date is set.
- The date of auction/sale is published and advertised as required.
- In case of a satisfactory bid, the property is sold to the highest bidder. Otherwise, the lender may choose to take back the property and hold it as REO.
- Deficiency judgment may be entered against the borrower if the property is sold for less than the total outstanding balance.
- Depending on the redemption rights, the borrower can get the property back by paying all the owned monies.
- A trustee’s deed is given to the highest bidder after the stuatory redemption duration has lapsed.