Foreclosures take one of two major paths: judicial (in court) or nonjudicial (out of court). If your home loan is secured by a mortgage, chances are excellent you’ll go through a judicial foreclosure. If your loan is secured by a deed of trust, you’ll probably go through a nonjudicial foreclosure. (Learn the do's and don'ts when you're in foreclosure.)
The real estate industry in a particular state, and the laws that industry’s lobbyists have pushed through the state legislature, pretty much determine whether mortgages or deeds of trust are used there. (Learn more about the difference between a mortgage and deed of trust.)
Again, mortgages are usually foreclosed in court, while deeds of trust are typically foreclosed nonjudicially. Though, it isn’t always clear what the foreclosure process will be. Even in a state where foreclosures are normally nonjudicial, the lender might choose to foreclose through the courts.
Not sure which document was used to secure your home loan? You can find out by:
In some states, the borrower has a right to request a judicial foreclosure even if a deed of trust authorizes a nonjudicial foreclosure.
A judicial foreclosure often takes longer—a lot longer—than a nonjudicial one. A judicial foreclosure also gives you a ready-made opportunity to oppose the foreclosure and assures that your home won’t be lost to foreclosure unless a judge signs off on it. Judicial oversight is an important protection against illegal tactics by the foreclosing party.
States where judicial foreclosures are the norm. If you live in one of the states listed here, and your home loan is secured by a mortgage, the foreclosure will probably take place in court: Connecticut, Delaware, District of Columbia (sometimes), New Jersey, New Mexico, Florida, Hawaii (usually), Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, New York, North Dakota, Ohio, Oklahoma (if the homeowner requests it), Pennsylvania, South Carolina, South Dakota (if the homeowner requests it), Vermont, and Wisconsin
Judicial foreclosure process. In judicial foreclosures, your lender—through its foreclosure attorney—gets things started by filing a foreclosure lawsuit in the local court. You'll receive official notice of the lawsuit when a sheriff or process server personally serves you with (or mails or posts on your door in some cases):
If you don’t respond, the lender will most likely get a default judgment authorizing the sale of the home. A default judgment means that you automatically lose the case because you didn’t respond to the suit. If you do respond by filing an answer with the court, the foreclosing party can’t get a default judgment. Instead, it will likely file a motion of summary judgment. You must respond to the motion or else the lender will win automatically. Even if you respond, the court may grant summary judgment in favor of the foreclosing party if there's no dispute as to the important facts of the case. However, if you have a valid defense and the court denies summary judgment, the case will proceed toward a trial, at which you and the lender will present your evidence and arguments. The judge will then:
(To get an idea about how a typical judicial foreclosure might proceed, see Typical Judicial Foreclosure: Example.)
Strict foreclosures. In two states, Connecticut and Vermont, a judge who approves the foreclosure can order ownership (title) to be transferred then and there. This is called a strict foreclosure.
Challenging a foreclosure. Judicial foreclosures are seldom if ever permanently derailed, but they can be significantly delayed. If you have grounds to fight the foreclosure, either because the foreclosing party can’t prove its case or because you offer proof that casts doubt on the foreclosure’s legality, such as evidence that you were not behind on your payments after all, it can take many months before the case is resolved one way or the other. Eventually, if the foreclosure is legally appropriate, the judge authorizes your house to be sold at auction or, in the strict foreclosure states, transferred directly to the lender.
With a nonjudicial foreclosure, a court will not oversee the procedure—except in a few states, where a court signs off on the foreclosure.
States where nonjudicial foreclosures are the norm. If you live in one of the states listed here, the foreclosure will probably be nonjudicial: Alabama, Alaska, Arizona, Arkansas, California, Colorado, District of Columbia (sometimes), Georgia, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico (allowed), North Carolina, Oklahoma (unless homeowner requests judicial), Oregon, Rhode Island, South Dakota (unless homeowner requests judicial), Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wyoming. (Even if lenders usually use a nonjudicial procedure in your state, your foreclosure could be judicial for a variety of other reasons, like because of a title issue.)
Nonjudicial foreclosure process. Generally, a deed of trust authorizes the entity named as trustee in the deed of trust to foreclose on the property if you ever default. The deed of trust typically allows the foreclosure to proceed outside of court. Your state’s law sets out the specifics of the foreclosure procedure, including how much notice you get. (To get an idea about how a typical nonjudicial foreclosure might proceed, see Typical Nonjudicial Foreclosure: Example.)
Challenging a foreclosure. Because you don't have the opportunity to raise defenses to the foreclosure in court as part of a nonjudicial foreclosure, if you wish to contest the foreclosure, you will have to file a lawsuit yourself. (Learn more in How to Fight a Foreclosure in Court: Nonjudicial Foreclosure.)