If you are in a nonjudicial foreclosure state, a lender does not have to go to court to foreclosure upon your house. Because of this, a nonjudicial foreclosure usually moves along fairly quickly – sometimes, the process can take just a couple of months from start to finish. If you find yourself facing a nonjudicial foreclosure, read on to find out more about the process. You can also reach out to us. Simply fill out our contact form and receive a free consultation with one of our legal experts.
Nonjudicial Foreclosure Definition
When a borrower takes out a loan on a home, they must sign either a deed of trust or a mortgage. In a nonjudicial foreclosure state, a borrower’s deed of trust will contain a “power of sale” clause. This clause gives the lending party the right to foreclose upon the borrower’s property by itself.
Steps in a Nonjudicial Foreclosure
There are four major steps to a nonjudicial foreclosure timeline: a loss mitigation period, the notice of default, the notice of sale, and the foreclosure sale.
Loss Mitigation Review Period
In the majority of foreclosure cases, the lending party is unable to initiate foreclosure until the borrower is at least 4 months (120 days) late on their loan payment. However, the lender can still send out notices of late payments, such as a breach letter and resources for legal aid and counseling.
A breach letter is a notice that lets you know your loan is defaulted – most deeds of trust require the lender to send a breach letter to the borrower before initiating foreclosure. Typically, you will have 30 days after receiving the letter to pay off your outstanding balance.
Notice of Default
When a trustee (this is a third party that will administer the nonjudicial foreclosure) files a notice of default at the county recorder’s office, this begins the nonjudicial foreclosure. Usually, the borrower will also be mailed a copy of the notice of default. If the borrower does not catch up on their late payment, the trustee will then prepare the notice of sale.
Notice of Sale
The notice of sale document records the time, date, and location of the property’s foreclosure sale. A notice of sale is, in most cases, mailed to the borrowing party, filed in the county recorder’s office, posted on the property, and published in a newspaper.
The Foreclosure Sale
The property will be sold off at a public auction. There may be a third party that bids the highest on the home – and then they would become the property’s new owner. However, in most cases, the highest bidder is going to be the foreclosing party.
You can stop the foreclosure up until the foreclosure sale – and, in some states, you can even reclaim the rights to the house after the sale. In those cases, you have something called a redemption period, in which you can pay off your outstanding balance during a certain time period after the foreclosure sale. Read our guide for more strategies on stopping or delaying a foreclosure sale.
When Do You Have to Leave After the Foreclosure?
At the moment, evictions in all states – both judicial and nonjudicial – have been halted under the CDC’s Order released under Public Health Service Act. The Order is located under Section 361 of the Act and has paused evictions until December 31, 2020, in order to prevent the unnecessary spread of COVID-19.
There is also a statewide foreclosure moratorium in New York, as issued by Governor Cuomo. The pause on foreclosure proceedings has been extended a couple of times. As of the time of writing, the moratorium is in place until October 20th – but it is likely to be extended even longer.
Nonjudicial Foreclosures States List
New York is a judicial foreclosure state, meaning that the lender must go to court in order to foreclose on your house. However, there are many states in which nonjudicial foreclosures are the norm. Here is the full list of nonjudicial foreclosure states:
- District of Columbia (in some cases)
- New Hampshire
- Rhode Island
- South Dakota (in some cases)
- West Virginia
A nonjudicial foreclosure allows the lender to foreclose upon property without a court order. This is only applicable to deeds of trust that contain the power of sale clauses. There are state laws that protect borrowers – for instance, there is a set period of time that must take place between the notice of default and the notice of sale.
The steps of a judicial foreclosure are quite different; for one, you have the right to a settlement conference, thus giving you the opportunity to negotiate terms in good faith and attempt to avoid foreclosure.
With judicial foreclosure, your case goes before a court – thus giving you the opportunity to present foreclosure defenses. It can be more of an expensive, drawn-out process, but this can give you time to gain your bearings and develop a strategy for having the case dismissed. For more information about judicial foreclosures, check out our article all about the topic.
Some states that require judicial foreclosures include Connecticut, Delaware, Florida, Illinois, Indiana, Kentucky, Louisiana, Maine, New Jersey, New York, North Dakota, Ohio, North and South Carolina, and Vermont.
This depends on the state, but it can take as little as 2-3 months.