How Nonjudicial Foreclosures Work

What is a nonjudicial foreclosure? Find out here.

Updated by , Attorney

In a nonjudicial foreclosure, the lender (or subsequent loan owner, called an "investor") doesn't have to go to court to foreclose your home. So, the process typically goes more quickly than a judicial foreclosure.

What States Use a Nonjudicial Foreclosure Process?

Not all states allow a nonjudicial foreclosure process.

The following states permit nonjudicial foreclosures: Alabama, Alaska, Arizona, Arkansas, California, Colorado, District of Columbia, Georgia, Hawaii, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico (nonjudicial process rarely used), North Carolina, Oklahoma (nonjudicial allowed, homeowner can request judicial), Oregon, Rhode Island, South Dakota (nonjudicial allowed, homeowner can request judicial), Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wyoming.

In these states, the state statutes set out the specifics of the nonjudicial foreclosure process, 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 sale or redeem the home after it's sold.

The Nonjudicial Foreclosure Process: Different From State to State

If you're facing a nonjudicial foreclosure, it's important to understand the procedures and timeline. While the nonjudicial foreclosure process varies from state to state, generally, here's how the nonjudicial foreclosure process works.

You Get Behind In Your Payments

Under federal law, in most cases, the servicer must wait until you are more than 120 days delinquent in payments before starting a foreclosure. During these 120 days, you'll get information about various loss mitigation options that might be available.

You'll Usually Get a Letter Notifying You of the Lender's Intent to Start a Foreclosure

If the loan contract requires it, the lender sends a "breach" letter informing you that a foreclosure will begin unless you make up the missed payments, plus costs and interest. The letter may be sent during the 120-day preforeclosure period.

Notices You Might Get In a Nonjudicial Foreclosure

Depending on what state law requires, you might get:

  • A notice of default and a notice of sale. A "notice of default" gives you time to reinstate your loan by making up all the back payments and might be followed by a notice of sale (if you haven't reinstated your mortgage by the deadline in the notice of default).
  • A combined notice of default and sale. A combined notice of default and sale states that the property will be sold on a specific date unless you make up the missed payments.
  • A notice of sale. Some states require only one notice, a notice of sale announcing that the property will be sold on a specific date unless you pay off the loan.
  • Notice through publication and posting. In a couple of states, the borrower gets notice only by publication and posting.

For the specific procedures in your state, check out the link to your state in our Summary of State Foreclosure Laws.

Right to Reinstate the Loan

State law often provides a right to reinstate the loan by catching up on what you owe, plus fees and costs, by a particular deadline before the sale. The deed of trust might also provide a reinstatement deadline before a foreclosure sale. With some exceptions, however, once the sale occurs, your house is gone.

The Auction Takes Place

If you don't reinstate the loan, the home will be sold at an auction. The foreclosing lender can credit bid up to the total amount of the debt, plus foreclosure fees and costs, while any other parties must bid in cash or a cash equivalent, like a cashier's check.

The lender will usually be the highest bidder at the foreclosure sale. The property is then known as "Real Estate Owned" (REO).

Redemption Period In Some States

Some states provide for a redemption period following a nonjudicial foreclosure sale. A "redemption period" is a specific amount of time foreclosed borrowers get to buy back, or "redeem," their property.

To find out if your state's laws provide a post-sale redemption period, check our Key Aspects of State Foreclosure Law: 50-State Chart.

You Voluntarily Leave or Get Evicted

Once the property is sold at a foreclosure sale, the property's ownership is transferred to the new owner. If you haven't already vacated the home, an eviction will start to remove you from the property. Although, in some states, the homeowner gets the right to live in the home during a post-sale redemption period.

You Might Face a Deficiency Judgment

If allowed by state law, the lender might later file a suit against you to get a deficiency judgment if the proceeds from the foreclosure sale didn't fully pay off the debt. If the court grants a deficiency judgment against you, you remain responsible for paying the deficiency after the foreclosure sale.

But some states don't allow deficiency judgments under certain circumstances.

How Fast Is a Nonjudicial Foreclosure?

A nonjudicial foreclosure might take a few months (sometimes less) to complete once officially started. In fact, in some states, nonjudicial foreclosures are extremely quick.

Talk to a local foreclosure attorney or a HUD-approved housing counselor to estimate the timeline in your area and your particular situation.

Challenging a Nonjudicial Foreclosure in Court

Because you don't have the opportunity to raise defenses to the foreclosure in court as part of a nonjudicial foreclosure, you'll have to file a lawsuit if you want to contest the foreclosure. In the suit, you ask the court to temporarily stop the foreclosure so that you can resolve the legal issues in court.

In this kind of lawsuit, you typically ask the court for three things in the following order:

  1. A temporary restraining order.
  2. A preliminary injunction (which, in foreclosure actions, will last until the court decides the case).
  3. A permanent injunction (which will be issued if the judge decides in your favor).

Once in court, you can raise the same defenses you would have raised in a judicial foreclosure proceeding.

Getting Help

If you're facing a foreclosure and want to learn about potential defenses that you could raise in court, whether you're likely to face a deficiency judgment, or how to avoid a foreclosure by working out an alternative, like a loan modification, consider talking to a foreclosure attorney.

Contacting a HUD-approved housing counselor is also a good idea.

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