Judicial vs Non-judicial Foreclosure
The foreclosure process differs from state to state, and essentially depends primarily on whether the state uses mortgages or deeds of trust as mortgage instruments to finance the purchase of real property.
A mortgage creates a lien on the title of the property while a deed of trust is a deed provided by a borrower to a trustee to secure payment and also creates a lien on the title of the property. A deed of trust can be foreclosed by a non-judicial process , it is also possible to foreclose with a judicial process. A mortgage must be foreclosed by a judicial process.
The non-judicial process is much faster 3 months versus up to a year for the judicial process. It is also cheaper than the judicial process as the courts aren’t involved in the process.
To foreclose in accordance with the judicial procedure, a lender must prove that the borrower has defaulted. After the lender has exhausted all non-legal means to resolve the situation it will instructs its attorney to pursue the matter. The attorney usually issues a letter demanding payment - if the borrower is unable to pay off the default, the attorney files a lis pendens (lawsuit pending) with the court. The lis pendens gives notice to the public that a pending action has been filed against the borrower. The purpose of the action is to provide evidence of a default and get the court’s approval to initiate foreclosure.
Non-judicial foreclosures are based on deeds of trust that contain the power of sale clause. The clause enables the trustee to initiate a mortgage foreclosure sale without having to go to court. The trustee is typically required to issue a notice of default and notify the borrower about the default status. If the borrower fails to respond , the trustee then initiates the steps for conducting the mortgage foreclosure sale of the home.
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[...] Usually, a judicial foreclosure occurs when there is no power of sale between the lender and the borrower in the trust or mortgage deed. For a more detailed discussion of the difference between judicial and non-judicial foreclosure and when a particular applies - read this article. [...]