In a nonjudicial foreclosure, a lender does not have to go to court in order to foreclose on your home. This means that the foreclosure typically proceeds more quickly than a judicial foreclosure. (In some states, foreclosures go through court. These are called judicial foreclosures.)
If you are facing a nonjudicial foreclosure, 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.
State law sets out the specifics of a nonjudicial 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, in many cases, you'll be given very little notice of the foreclosure sale, and once it happens, you might be permanently out of luck.
Nonjudicial foreclosure notices. Depending on what state law requires, you may get:
Right to reinstate. In most states, you typically are allowed to reinstate the mortgage by paying off what you owe, plus fees and costs (which can be very high) by a certain deadline prior to the sale. 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, the property often goes to the lender after no one else bids on the property.
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).
You leave voluntarily or get evicted. If you don't leave the property when your legal right to remain in the home ends (which depends on state law), you will receive an official, written notice to leave the property. It's best to move out at this point. Learn more about what happens if you don't leave the home.
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: