Judicial VS Non-Judicial Foreclosure Processes

When it comes to judicial or non-judicial foreclosure, there are many differences between the two. In either case, the lender will have to go through a court proceeding to gain control of the property. In a judicial foreclosure situation, the lender can sell the home without a court case if they so choose. They do not need a court case to force the borrower to sell the house. The borrower has the right to bring a lawsuit to obtain relief from foreclosure, but they would lose their right to a trial.

In judicial foreclosure states, once the bank takes possession of the house, it must post a bond, which is paid by the owner until they pay the balance of the loan plus costs toward the home's purchase and interest. If the owner makes their payment on time, the lender is allowed to remain in the property until the entire debt is satisfied. If the owner fails to make their payments, the lender can then take the home away through a process called eviction.

In non-judicial states, there is no bond requirement or process for the bank to post. Once the lender takes ownership of the property, they have the right to auction it without a showing of probable cause at a foreclosure trial. There is no final judgment at any point during the foreclosure trial, meaning the plaintiff has no way to fight back against the foreclosure. A plaintiff in judicial states does have some chances to challenge the legality of the sale. If the plaintiff can prove that there was an error in the lending process, they may be able to get their loan modified or their mortgage voided, allowing them to save their home from foreclosure.

In judicial foreclosure states, there are two types of defenses to foreclosure: the defendant has waived their right to a trial and the plaintiff has shown the deficiency in the lending process. In a case where the bank files a brief saying it did not receive proper authorization to sell the home, the plaintiff has the burden of proving the bank did not act properly in signing the contract. In this instance, the plaintiff will need to introduce evidence of the authorization, either by the lender itself, a third party or a public official. If the bank can show that the homeowner waived their right to a trial, this will be a dismissal of the complaint and will give the plaintiff the win in the case. If the bank can show the homeowner waived their right to a summary judgment motion, it will win at summary judgment, but it may be up to the judge to make a determination on the merits of the complaint.

Affirmative defenses are motions that the plaintiff can raise, without a showing of proof, to defeat the bank's attempt to take the home. These defenses include negligence, mistakes or omissions by the lender, its sale process or property structure. A plaintiff cannot raise these defenses at the trial level, although some courts allow them to be raised after the fact in an attempt to confuse the lender. These defenses are not accepted at trial, but the court can rule on the merits after a summary judgment has been rendered.

Nonjudicial processes involve the filing of a lawsuit by the homeowner. The suit must be filed within three years of the date of the foreclosure sale. The complaint does not have to detail the foreclosure process, but must detail the acts or omissions of the bank that are the basis for the foreclosure. The complaint also needs to detail all possible remedies the homeowner may pursue to hold the bank accountable for the foreclosure.

The rights of a homeowner has when fighting a foreclosure are determined by what state the foreclosure is filed in. In all states, a foreclosure requires a showing of laches (ties) in the contract between the lender and the borrower. This means the lender is either legally bound to sell the property at auction or it can be held in bankruptcy court. The rights become less certain with each state's laws because different states have differing remedies for holding foreclosures. While homeowners are always protected under state law, they need to know their rights under local laws in the specific county in which they own the home.

In judicial states, homeowners are afforded certain extra rights after the foreclosure process is complete. The courts cannot force a lender to sell a house through legal auctions or require it to take any action against the homeowner. Once the homeowner has been evicted from the property, the bank cannot sue the homeowner for foreclosure unless the deed of trust is in place or the mortgage is transferred. This gives borrowers the opportunity to get out from under the mortgage and start over.