If you live in a nonjudicial foreclosure state, your lender does not have to go to court in order to foreclose on your home. This means that the foreclosure can proceed more quickly.
(In some states, foreclosures go through court. These are called judicial foreclosures. To learn more, see How Judicial Foreclosures Work.)
If your property is in one of these states, you most likely signed two core documents when you bought or refinanced your home: a promissory note and a deed of trust. The deed of trust turns the promissory note into a debt secured by a lien (legal claim) on your home. The deed of trust authorizes the lender to foreclose on the property if you default. The deed of trust typically allows the foreclosure to proceed outside of court, under state law.
States Using Nonjudicial Foreclosure
|Arkansas||New Mexico (sometimes)|
|Colorado||Oklahoma (unless homeowner requests judicial forclosure)|
|District of Columbia||Oregon|
|Idaho||South Dakota (unless homeowner requests judicial foreclosure)|
The Nonjudicial Foreclosure Process
Your state's law sets out the specifics of the foreclosure procedure, including how much notice you get, how the property will be sold (typically at a public auction), and what rights (if any) you have to reinstate the loan before the foreclosure date or recover title to the property after it's sold.
Time may be short. You have to be on your toes when a foreclosure looms in a nonjudicial state. That's because you'll be given very little notice of the foreclosure sale, and once it happens, you may be permanently out of luck.
Notice of sale. In some states, your first notice of the proceeding will be the notice of sale. Depending on the state, this notice will be either served on you personally, published in the local newspaper, posted in the courthouse and on the property itself, or by some combination of the above.
Notice of default and notice of sale. Some states provide you with two notices -- a formal written notice that you are in default (usually about 30 days, but sometimes more and sometimes less) and another formal notice that your house will be sold at auction (again, usually about a month).
Right to reinstate. Between the notice of default and notice of sale, you typically are allowed to reinstate the mortgage by paying off what you owe, plus fees and costs (which can be very high). With a couple of exceptions, however, once the sale occurs, your house is gone.
The auction is held. If you don't reinstate the mortgage, the home will be sold at auction. As with judicial foreclosures, if no one meets the minimum bid, the property goes to the lender.
Right to redeem. A few states give you some time after the foreclosure auction to redeem the property (to recover ownership of the property by paying off the successful bidder).
Challenging a Nonjudicial Foreclosure in Court
Because you don't have the opportunity to raise defenses to the foreclosure in a nonjudicial foreclosure, if you wish to contest the foreclosure, you will have to file a lawsuit yourself. When you do this, you ask the court to temporarily stop the foreclosure so that you can resolve the legal issues in court (and possibly at trial). Once you are in court, you can raise the same defenses you would have raised in a judicial foreclosure proceeding.
In these lawsuits, you typically ask the court for three things, in the following order:
- a temporary restraining order (which lasts about ten days)
- a preliminary injunction (which, in foreclosure actions, will last until the court decides the case), and
- a permanent injunction (which will be issued if the judge decides in your favor).
To learn more about the ins and outs of foreclosure, both judicial and nonjudicial, see Nolo's Bankruptcy and Foreclosure Blog or the bestselling Foreclosure Survival Guide. To read an engrossing (and sometimes hilarious) account of one newly minted California attorney's successful fight to stave off foreclosure and keep his clients in their home, see Wajahat Ali's article in McSweeney's San Francisco Panorama magazine (December 2009), "Could It Be That the Best Chance to Save a Young Family From Foreclosure Is a 28-Year-Old Pakistani American Playright-slash-Attorney who Learned Bankruptcy Law on the Internet? Wells Fargo, You Never Knew What Hit You."
To learn more, visit our Judicial v. Nonjudicial Foreclosure topic page.