Non-Judicial Foreclosure

Posted by admin

April 15, 2008

Non-Judicial Foreclosure occurs without any court intervention and, this kind of foreclosure is simply between the lender and the borrower, or other persons with connections to the transaction like a mortgage broker or a financial adviser. It is preferred by lenders as it provides the mortgage lender with a greater degree of control, in many instances it would suit the borrower as well as the lender has an incentive in getting the best price for the property, thereby limiting the lender’s credit exposure.

The actual process may vary from State to State and you should find out what the exact process is in your State. Some states require a Notice of Default while others start the process with The Notice of Sale.

Notice of Default

When the mortgage has reached its maturity date and the borrower has yet to fulfill the payment of the debt, then the lender will send a Notice of Default informing the borrower that the deadline for the said mortgage has elapsed and that the lender is in breach.

If the borrower does not comply with the Notice of Default then the lender may now issue a Notice of Sale to the borrower, auction houses, and public notices that the property is now foreclosed and will be sold to the highest bidder.

Once the borrower has failed to pay the debt within the said deadline then the lender will issue a Notice of Default to the debtor. The notice states that the recipient of the letter has not paid their dues in the stated deadline. The letter will also contain a small extension of the deadline for the debtor to pay the obligation.

The 3-months Reinstatement Period

Once the Notice of Default is issued the borrower enjoys a reinstatement period of 3 months, to reinstate the loan. During this period, the borrower may communicate directly with the lender to try to either extend the loan or to pay it in full to avoid a foreclosure.

Notice Of Sale

If the payment is not made within the deadline stated in the notice, then the lender may issue a Notice of Sale to the borrower, the public, or to those connected to the transaction that the property is now foreclosed and is open to a public auction. After the prescribed publication period the property is sold at auction to the highest bidder usually for cash or a cash equivalent.

(The process outlined above applies to California properties)

Time Frame

It is important to know the time frame for the different processed of a non-judicial foreclosure; this will give you an important edge either in reinstating the loan or trying to catch up with the payment deadline. It is important to keep in mind that the time frame will vary from state to state and you should find out what the relevant processes are in your state.

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