If a “power-of-sale” provision in the mortgage note or deed of trust exists, lenders may use the nonjudicial foreclosure method. If the borrower defaults on their loan, the lender has the right to sell the home and use the money to pay off the loan. A lender does not need to hold a court hearing to complete the foreclosure process, as the name implies. The nonjudicial foreclosure process is governed by strict rules and lenders must have proof of mortgage ownership and the borrower’s inability to pay.
The lender starts the process by sending a Notice of Default to the borrower, giving them 90 days to cure the default. If the borrower fails to comply, the lender has 21 days to file a Notice of Trustee’s Sale, and after 21 days, the house is auctioned off. The borrower, on the other hand, has until five days before the auction to cure the default and stop the auction.
The difference between nonjudicial and judicial foreclosure is that a nonjudicial foreclosure is less expensive and takes less time. Hence, why lenders prefer nonjudicial over judicial foreclosures. When compared to judicial foreclosure, nonjudicial foreclosure takes less time. In a nonjudicial foreclosure, borrowers do not have a right of redemption, which means they cannot repurchase the property after the foreclosure sale as they can in a judicial foreclosure. At the same time, the lender relinquishes their right to sue the borrower for the difference between the proceeds from the real estate sale and the amount remaining on the mortgage.
Meaning of Nonjudicial Foreclosure
There are jurisdictions whereby property can be foreclosed by lenders. Due to the fact that they are allowed, there won’t be any need for court order to be first of all obtained. In simple terms, nonjudicial foreclosures exist when lenders foreclose properties in jurisdictions where they don’t need to obtain any court order. It is important to note that such foreclosures are only available in clauses that relate to “trust with power-of-sale” and “deeds”.
Another way to look at nonjudicial foreclosure is that there is no court involvement. Although there is judicial foreclosure where court is involved, nonjudicial process seems to be the most commonly used.
Advantages of Nonjudicial Foreclosures
Just as said above, in most cases, many lenders prefer to explore the option of nonjudicial foreclosure. This is due to the advantages or benefits that it has been discovered to offer. These will be highlighted and briefly explained below:
They Are Less Expensive
This is probably one of the major benefits of a nonjudicial foreclosure. When a lender has limited budget, there is every reason to explore this option. They do not have to bother about hiring an attorney or incur any unnecessary court expenses. All of these are completely nonexistent in this process.
They Are Very Fast
It is no secret that judicial processes can be complicated and time-consuming. Before a decision is reached and all the necessary documents obtained, it can take months or even years. Therefore, nonjudicial foreclosure is the best. This is because a lender won’t experience any delay since the court won’t be directly involved.
Once the right notice has been given, the lender can then proceed towards selling the property in question. Lenders won’t have to bother about clerical errors delaying the process. This type of foreclosure is a time-saver.
They Are Easier
With nonjudicial foreclosures, there won’t be any complication as everything will be go smoothly. It is all about hiring the right processing firm that can help you without complaint.
How Does Nonjudicial Foreclosures Work?
Nonjudicial foreclosures work in a simple way. In this case, your home can be foreclosed even without the lender going to court. It is quite different as compared to judicial foreclosure whereby a lawsuit will have to be filed by the foreclosing party. This is because you only have to follow some specific instructions (out-of-court procedures) for the process to be completed. It is quite different in locations. For instance, there are states where such procedures are either not allowed or they are limited to a great extent. It is therefore better to seek the advice of an expert attorney before taking any action about foreclosure.
At the beginning of the process, the lender doesn’t have to go to any court. Instead, he only needs a trustee for the foreclosure to commence. He must be listed or mentioned in the deed of trust which is attached to such home. There are times when the trustee or lender may become lenient with the homeowner. In such instance, he will be given some time to pay up the loan. Some may even try to negotiate with their lenders. On the other hand, there are times when a lender may send a notice indicating that a homeowner has defaulted. Such notice can also be sent alongside a notice of sale.
Having said all of these, it is important you understand one thing. Nonjudicial foreclosures only benefit lenders. In other words, it makes you face the risk of losing your home within a short time since the property can be sold without any permission from the court. It is therefore advised that you explore every possible option available.
Is It Possible To Delay A Nonjudicial Foreclosure?
This is one question that many homeowners keep on asking on daily basis. In simple terms, it is very possible to delay a nonjudicial foreclosure. You only need to understand how this can done. There is no need to worry though since you will be finding out the process below. Just follow the steps and you will be fine.
The first step you need to take is seeking an injunction. This will help in slowing down or stopping the foreclosure process. There are times when a homeowner will decide to have a bond posted. This is a form of money paid as compensation for delaying the foreclosure process. Based on this, it is recommended that you consider whether delaying such process is worth all the hassles. This is because it can cost you more money.
If there is a burden of proof, it is better to hire the services of an experienced attorney. Although legal fees can be quite high and will likely add up as the months are passing by, this can help to delay the process. It is much better when your defense is strong. This is because it will take some time before your case is dismissed in court.
Please note that all of these will only help to provide more time to make alternative arrangements. It is not in any way going to stop the lender from selling such property as such will happen based on instructions from the lawcourt. This is the reason why you should consider whether exploring such option is worth it or not.
Foreclosure Rights of Homeowners
It is important to understand that foreclosure process doesn’t happen straightaway. This is because there are certain conditions that must be fulfilled by the lender before it can commence. This means that as a homeowner, you have certain rights before, during and after such process has been completed. We will be looking at some of these rights below:
Rights Prior To Foreclosure
In a situation whereby you missed any of your payments, it is expected for the mortgage servicer to contact you within a period of 36days. The goal is to discuss the various loss mitigations with you. The lender is also expected to write you a letter of loss mitigation. This should happen within 45days when a payment has been missed. For missed additional payments, you must be contacted within 36days. The only time when a lender is allowed to commence foreclosure process is when payment is 120days overdue. It is expected that within this period of 4months (or 120days), you must have applied for loss mitigation.
The summary of this is that you must receive notification from a lender that your loan is overdue for payment before foreclosure can happen. In other words, you must have defaulted in the agreement for repayment of such loan. While you can be summoned to a court in the case of judicial foreclosure, it is quite different for nonjudicial foreclosure. The latter only requires that you are sent a notification about failing to pay the loan as agreed.
Your Rights During Foreclosure
Most people are not aware of their rights during foreclosures. Do you know you have the right to redeem such property prior to the foreclosure sale? By this, we simply mean paying the amount being owed as loan. It is even possible to do this after the property has been sold to another buyer. This only involves having to reimburse the buyer. Note that right to reinstatement isn’t available in all the states.
With a right to reinstatement, you have the chance of reactivating the payment of such loan again. You will only have to pay the necessary fines. In a situation whereby this right isn’t available in your state, there is no need being worried. This is because it can be received via mortgage or even deed of trust. Apart from the court, it is also possible for the lender to allow mortgage to be reinstated. There is also foreclosure mediation which is available in most states. Through this, you will discuss with the lender in a bid to finding an alternative to the option of foreclosure.
Your Right After The Foreclosure
The lender isn’t expected to make more than you are owning from the sale of your property. Therefore, if the money generated from its sale is more than what you are owing, the law permits you to take the surplus. On the other hand, if the lender doesn’t realize the complete loan from sale of the property, you will be expected to pay the remaining amount.
Tips For Avoiding Foreclosure
Whether it is judicial or nonjudicial foreclosure, one thing is always certain. This is the fact that you are at huge disadvantage. The reason is quite simple as you are likely to lose your home to a lender due to default in the original payment agreement for loan obtained. It doesn’t really matter whether the process is delayed as you are only postponing the evil the day.
Having said the above, this section will be discussing some of the best ways to avoid foreclosure. Check out each of them below.
Communicating With Your Lender
One of the reasons why foreclosures happen is poor communication between borrowers and lenders. If you are having any kind of financial difficulty, it is always better to let the lender know. Never make the mistake of keeping them in the dark as such may be wrongly interpreted. Constant communication helps to ensure both parties have a healthy relationship.
Understanding Your Rights
This is also very important and should never be ignored. Just as said above, there are certain opportunities that the law offers you. These can help you avoid foreclosure once maximized as expected. Thus, it is recommended to look at all the documents pertaining to your loan. This gives you an idea of the power and limitations of your lender when you have defaulted.
Prioritizing Your Spending
It is true that your health is important. However, your home is also important. This is why you want to cut down on your spendings to ensure you are meeting up with loan payments. Avoid spending unnecessarily on things that are not important.
Real Estate Foreclosure Attorney Near Me
State foreclosure laws are complicated, so it’s a good idea for both borrowers and lenders going through the process to seek legal advice. If you have questions about foreclosures, contact an experienced Attorney Real Estate Group agent who can help you with your particular situation.
Our team has extensive real estate experience and has worked with clients in all areas. We strive to provide the best possible service to our clients by considering their objectives and conducting a thorough and objective analysis of the most efficient means of achieving them.
Please contact us here or call (800) 481-4049; we hope to assist you.