Judicial vs. Nonjudicial Foreclosure: Which One Applies to You?
When people talk about judicial vs nonjudicial foreclosure, they mean the two main ways a lender can sell a home that secures a loan. The difference matters, because it changes the steps, the deadlines and the way a homeowner can respond.
Two documents behind every home loan
A home loan usually involves two papers. The promissory note is the borrower’s promise to repay. The mortgage or deed of trust is the security instrument that gives the lender an interest in the property. As a result, foreclosure questions often turn on both documents.
How judicial foreclosure works
In a judicial foreclosure, the foreclosing party files a lawsuit and must get a court judgment before the property can be sold. The borrower can file an answer and raise defenses. The case then follows the state’s rules of civil procedure, including discovery and motions such as summary judgment.
If the court rules for the foreclosing party, it enters a judgment of foreclosure and orders a sale. Many states also require the court to confirm the sale, and some allow redemption for a period afterward. Because it is a lawsuit, the deadline in the summons applies, and missing it can lead to a default judgment.
How nonjudicial foreclosure works
In a nonjudicial foreclosure, the property is sold without a lawsuit. Instead, the sale follows a power-of-sale clause in the deed of trust or mortgage and the procedure in the state statute. Typically that means a notice of default, a waiting period, a notice of sale and then a public auction.
No judge approves the sale in advance. So a borrower who believes the process is defective generally must file a lawsuit to challenge it. Because there is no court supervision, state statutes spell out the notice, timing and sale requirements in detail.
Judicial vs nonjudicial foreclosure in your state
Every state allows judicial foreclosure, and many also allow the nonjudicial kind. Which one applies depends on state law and on the security instrument. Our foreclosure by state guide shows the most common process in each state and its main statute.
Federal rules apply either way
Federal servicing rules sit on top of state law for most home loans. For example, a servicer generally may not make the first foreclosure notice or filing until the loan is more than 120 days delinquent, under 12 C.F.R. § 1024.41(f). Our guide to federal pre-foreclosure protections explains the details.
Finally, foreclosure law changes and varies widely. Read your state’s current statute, and talk to a licensed attorney or a HUD-approved housing counselor about your own home.
