In judicial foreclosures, the mortgagee must go to court and prove that they own the mortgage and that they have the right to foreclose it. If you suddenly find that you can't pay your monthly loan payment, your lender has a legal right to get your house back and resell it to recover the cost of the loan. Foreclosure is a legal course of action in which no one really wins. It's a stressful and unfortunate situation for both the landlord and the lender.
Many people continue to deny their finances, making the situation worse. As unfortunate as the foreclosure process is, there are things you can do to save your home if you're faced with it. In the chart below, this column indicates whether a deficiency judgment is allowed in (or after) the most commonly used foreclosure proceeding in that particular state. In a non-judicial foreclosure, a third party called a “trustee” is responsible for foreclosure rather than a court.
To learn more about how foreclosures work in your state and your rights during the process, talk to a foreclosure lawyer. However, if the mortgage includes a “power to sell” clause that authorizes the lender to sell the property in the event of default by the borrower, these states will allow the lender to use non-judicial foreclosure. If the foreclosure sale doesn't offset the loan, including accrued interest and selling costs, the lender can also obtain a deficiency judgment for the difference. In a commercial foreclosure, and if the mortgage provides for it, the lender can request that a bailiff be appointed.
In other states, foreclosure may be judicial or non-judicial; in those states, one or the other is generally used more commonly. It is not available after a non-judicial foreclosure, unless the trust deed specifically grants a right to repayment. While there may be some similarities, the procedural requirements for a foreclosure can vary widely from state to state. Federal law generally prohibits a lender from initiating foreclosure until the borrower is more than 120 days behind schedule.
Zombie foreclosures, or zombies, are properties in the process of foreclosure, but have not been seized by the lender. Avoiding foreclosure often involves contacting other people, and they can only help if you can provide them with solid information. In some states, where foreclosure applies to commercial property, the lawsuit may also include a request for the court to issue an order requiring the borrower to deposit all rents on the property with the court or other depositary. When a power of sale clause establishes a procedure for foreclosure, that procedure will be followed unless it does not meet the minimum requirements of state law.
To qualify for a non-judicial foreclosure, the lien creditor must have a trust deed with a power of sale clause that gives them the authority to sell the property.
