Non-Judicial Foreclosure Explained

The non-judicial foreclosure process is a very unique one that has been adopted by certain states. Each state has their own method of foreclosure processing. Some states require a judicial process to foreclose on a piece of property. Other states utilize the non-judicial foreclosure method when a house needs to be foreclosed upon. If you are facing a non-judicial foreclosure, you need to understand exactly how the process works. Here are a few things to consider about the non-judicial foreclosure process and what is involved with it. 

Defaulting on a Mortgage

When you buy a house, some states will issue you a deed of trust while others use a mortgage. If your state utilizes a deed of trust arrangement, then they will allow non-judicial foreclosures to go through. When someone does not make their payments on their home loan, the lender will warn them that they are late on their payments. If nothing is done about the late payments, the loan will go into default. The lender will then notify the borrower that they are in default of their loan. 

At that point, the homeowner can contact the lender and remedy the situation in a number of different ways. They could pay back the missed payments or negotiate a loan modification. If they do not manage to work out a solution with the lender, they will then move on to the next step. 

Non-Judicial Foreclosure Process

Once the homeowner has failed to do anything about the default status of the loan, the lender will then record a notice of default on public record. They will then create a Notice of Sale and post it in several different areas. The homeowner will receive a copy in the mail so that they know when the sale is going to occur. They will then post the Notice of Sale in public places, put it in the newspaper, and in other legal publications. The fact that a sale is going to take place is well understood by the time the sale date arrives. 

Auction

Once the date of the sale arrives, the lender will have an auction to sell the property. They will start the bidding at a certain price and it will progress in an auction-style format until the winner has been decided. The property will be sold to the person with the highest bid and they will then be required to pay for the house. 

In most cases, you will have to bring cash to a non-judicial foreclosure auction. They do not allow you enough time to secure financing and pay for the property. Therefore, this process is only open to those that have enough cash to buy a house. 

Why This is Allowed

With a non-judicial foreclosure process, you do not have to get any allowance from the court or anyone else to proceed. The process is governed by state statutes and the clauses that you sign when you get a mortgage. You are allowing the mortgage lender to sell the property if you fail to make your payments. 

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