Judicial v. Non-Judicial Foreclosure States
You may have heard the term judicial sale or judicial foreclosure sale and wondered what the difference is between a judicial sale and non-judicial sale state and whether or not a foreclosure sale can happen without a judge’s approval. Unfortunately, in the non-judicial sale states this is generally what happens and the courts only become involved if the bank also tries to get a deficiency judgment against you as discussed below.
Overall, twenty-two states utilize the judicial sale foreclosure method which requires lenders to use the court system to both file the actual lawsuit and conduct the foreclosure sale if they win the lawsuit. The remaining twenty-eight states operate under the non-judicial sale method and permit out-of-court foreclosures as noted earlier.
Judicial Sale States
The judicial sale states are Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Vermont and Wisconsin. Although the foreclosure process may vary widely in these states, at least the courts are involved to help protect your Foreclosure Rights.
Non-Judicial Sale States and Deficiency Judgments
The Foreclosure Process differs in non-judicial sale states from the typical judicial sale in several ways and is generally a combination of state law and the specific requirements of the promissory note and mortgage or deed of trust, which is often used in non-judicial states. Learn about the difference between Your Promissory Note and Mortgage.
The actual foreclosure process itself can be very informal and typically consists of a simple Notice of Default with deadlines for payment of the past due balance and sale of the property if payment is not made without the formalities and protections involved with judicial foreclosures. Because of the importance of understanding your your loan documents and risk of losing your home before you even understand your foreclosure rights, we strongly recommend consulting an attorney in your state with expertise handling out-of-court foreclosures and stopping foreclosure sales in non-judicial sale states.
Deficiency Judgments in Non-Judicial Sale States
A deficiency judgment occurs when the sale price of your home is not enough to pay off the primary mortgage. If the lender tries to collect the resulting balance and obtains a court judgment, the amount of the judgment is called a deficiency judgment and also includes attorney’s fees, costs and interest incurred by the lender. Defending Foreclosure Lawsuits
Even in non-judicial sale states the only method of securing a deficiency judgment is through the court system. As a result many lenders use the courts to process foreclosures to obtain both the property and a judgment for any amount not covered by the foreclosure sale.