What Is a Judicial Foreclosure?

Judicial foreclosure refers to foreclosure proceedings on a property in which the mortgage lacks a power of sale clause. In this case, the foreclosure proceedings are settled through the courts. Power of sale is a clause written into a mortgage. In the event of default, it authorizes the lender to sell the property to repay the mortgage debt. In this case, legal proceedings can be sidestepped. Power of sale is permitted in many states as part of a lender’s rights to seek a foreclosure.

How Judicial Foreclosure Works

Judicial foreclosure refers to 澳洲幸运5官方开奖结果体彩网:foreclosure cases that go through the court system. 澳洲幸运5官方开奖结果体彩网:Foreclosure occurs when a home is sold to pay off unpaid debt. The procedure is carried out according to the laws of the jurisdiction in which the property is situated, which is almost always state law. Many states require foreclosures to be judicial, but in some states, foreclosures can also be nonjudicial.

If the court finds that the mortgagor is in default, an auction can be scheduled for the sale of the property to acquire funds to repay the lender. This differs from nonjudicial foreclosures, which are processed without court intervention.

Many states require judicial foreclosure to protect the equity that debtors may still have in the property. Judicial foreclosure also serves to prevent strategic disclosures by unscrupulous lenders. In instances where the auction does not generate enough funds to repay the mortgage lender, the former homeowner will still be held liable for the remaining balance through what is called a deficiency judgment.

Judicial Foreclosure Process

Judicial foreclosures can last anywhere from six months to around three years, depending on the state. To begin the foreclosure process, the mortgage lender must wait until the borrower is delinquent on payments for 120 days.

At this point, the ser𒁏vicer notifies the foreclosing party with a breach letter, letting the debtor know they are in default on their mortgage. In most cases, the debtor then has 30 days to cure the default, and if they are not able to, the servicer will move forward with foreclosure proceeding😼s.

The foreclosing party next files a lawsuit in the county where the property is located and requests the court to allow the home to be sold to pay the debt. As part of the lawsuit, the foreclosing party includes a petition for foreclosure that explains why a judge should issue a foreclosure judgment. In most cases, the court will do so, 澳洲幸运5官方开奖结果体彩网:unless the borrower has a defense that justifies the delinquent payments.

Depending on the state, the foreclosing party may also be entitled to a 澳洲幸运5官方开奖结果体彩网:deficiency judgment. A deficiency judgment allows the house to be sold at a foreclosure sale for less than the outstanding mortgage debt. The difference between the debt and the foreclosure sale price is the deficiency. In most states, the foreclosing party can get a personal judgment against the borrower for the deficiency.

The Bottom Line

Mortgage lenders have ways to recoup their losses when borrowers default on their loans. The most drastic is to repossess the property and sell it. Before that can happen, they need to have the authority for a power of sale. It the loan documents don't contain this clause, they may need to seek a judicial foreclosure. This allows them to go to court to seek approval for power of sale so they can sell the home and pay off the mortgage. Judicial foreclosures stay on your credit report for seven years, so it's important to work with your lender to keep your home and credit score in tact.