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Foreclosure Process and Laws for All States
Traversing the foreclosure process is the legal remedy by which lenders reclaim their collateral when a borrower defaults on a mortgage. Each state has their own specific laws regarding their foreclosure process.
The “foreclosure process” is similar, but different from state to state in two main categories:
- Non-Judicial Foreclosure—no court approval or court process
- Judicial Foreclosure—requires court filings and court appearances
Process for Non judicial Foreclosure:
Foreclosure companies perform non judicial foreclosures without going through the court system. The lender chooses a private foreclosure company to act as trustee and perform the foreclosure process, which can take 30 days to 1 year depending on the state laws, and other factors could extend this process. The non judicial process is a much faster, more efficient, and less expensive process for the lender than a judicial foreclosure.
In the beginning of the non judicial foreclosure process, a notice of default is recorded at the county recorders office, noticing the borrower and any junior lien holders, and the notice of default is published in local newspapers. The notice is usually published several times over a period of weeks or months. Usually, there is a waiting period which ranges from weeks to months for the borrower to cure the default, depending on the state laws.
The next step is announcing the trustee sale/foreclosure sale, by recording a notice of sale at the recorders office, which is published in the local newspaper along with auction sale date and property address. Following thereafter, the trustee sale/foreclosure sale is conducted by an auctioneer, where the public is allowed to bid on the defaulted property, and it is sold to the highest bidder.
This auction is usually an all cash auction, where bidders must qualify to bid by presenting the auctioneer with a cashiers check prior to bidding. The winning bidder then pays the auctioneer by cashiers check immediately afterward. In the event there are no bidders, the property refers back to the bank. The foreclosure trustee prepares and delivers a trustee’s deed, granting title to the winning bidder within the next week, and it is finally recorded at the county recorders office.
Process for Judicial Foreclosure:
Approximately half of the 50 states require properties to go through the judicial foreclosure process, yet, this process is allowed in almost all states. A judicial foreclosure is a drawn out and more expensive process. Again, you have a series of court filings, appearances before judges, noticing the borrowers, and junior lien holders.
In addition, the lender is required to hire an attorney and prove in court that they have the right to take possession of a property. The judge gives the lender permission to proceed with a foreclosure auction/sheriff’s sale, which is generally supervised by the court ending the foreclosure process.
Many states require a judicial foreclosure process, and some states allow both the judicial or non-judicial foreclosure process. With the time and money saved, lenders usually prefer the faster non-judicial process although, not always available.
There are unique circumstances where a lender will choose a judicial process, especially the foreclosure of a valuable commercial property when litigation is likely. Choosing the judicial process may guarantee a lender certain advantages over the shorter non judicial process, such as deficiency judgments and sometimes disadvantages such as right of redemption.
Foreclosure Basics by State:
|State||Security Instrument||Foreclosure Type||Initial Step||Time Line in Months||Right of Redemption (Months)||Deficiency||Timeline + Redemption (Months)|
|ALASKA||Trust Deed||Nonjudicial||Notice of Default||3||0||Allowed||3.00|
|ARIZONA||Trust Deed||Nonjudicial||Notice of Sale||3||0||Allowed||3.00|
|CALIFORNIA||Trust Deed||Nonjudicial||Notice of Default||4||0||Prohibited||4.00|
|COLORADO||Trust Deed||Nonjudicial||Notice of Default||2||2.5||Allowed||4.50|
|D.C.||Trust Deed||Nonjudicial||Notice of Default||2||0||Allowed||2.00|
|IDAHO||Trust Deed||Nonjudicial||Notice of Default||5||0||Allowed||5.00|
|NEVADA||Trust Deed||Nonjudicial||Notice of Default||4||0||Allowed||4.00|
|NEW HAMPSHIRE||Mortgage||Nonjudicial||Notice of Sale||2||0||Allowed||2.00|
|NORTH CAROLINA||Trust Deed||Nonjudicial||Notice Hearing||2||0||Allowed||2.00|
|OREGON||Trust Deed||Nonjudicial||Notice of Default||5||0||Allowed||5.00|
|UTAH||Trust Deed||Nonjudicial||Notice of Default||4||0||Allowed||4.00|
|WASHINGTON||Trust Deed||Nonjudicial||Notice of Default||4||0||Allowed||4.00|
|WEST VIRGINIA||Trust Deed||Nonjudicial||Publication||2||0||Prohibited||2.00|
Original source of table: http://www.foreclosureforum.com/basics.html. The foreclosure process and the laws are constantly changing. Utilize the table above, but check with your state for an updated version.
Go forth and conquer!
Our offices are working upwards of 30 pre-foreclosures (properties not listed in the MLS) at any given time. To protect homeowners or tenants currently still living in bank owned properties, and because of MLS rules, we are unable to give out addresses of our unlisted pre-foreclosures.
However, as bank owned properties are able to be listed on the MLS, and if you answer a few questions below, we can contact you first when a property of your dreams is about to be listed. Also, be sure to check out my gallery on Maui Short Sales.
Please call or send me this information:
- Assets you desire in a property (i.e. acreage with a house and cottage, condo, 3 bed/2 bath, swimming pool, vacation rental on the golf course, etc).
- Pre-approval letter or proof of cash. I would be happy to send you names of loan officers, so that you can be pre-approved and ready to make an offer.
- Preferred location (i.e. W. Maui, S. Maui, or an actual town such as Haiku, Kapalua, Kihei, Wailea, or a zip code).
- Phone number, name, and email address.
Kathleen Wilson, SSCP – Short Sale Certified Professional – Five Star Institute, RECP – REO Certified Professional – Five Star Institute and SFR – Short Sale Foreclosure Resource.