Foreclosure State Regulations Provide Defense Variables

The foreclosure process varies from state to state, so it is important to understand the differences and know your specific state’s procedures. There are 2 main types of foreclosure: judicial and non-judicial. This depends primarily on whether the state uses Mortgages or Deeds of Trust for the purchase of real property. Generally, states that use Mortgages conduct judicial foreclosures, and states that use Deeds of Trust conduct non-judicial foreclosures.

The principal difference between the two is that the judicial procedure requires court action on a foreclosed home. Judicial foreclosures are processed through the courts. The complaint will state what the debt is, and why the default should allow the lender to foreclose and take back the property as security for the loan. The homeowner will be served notice of the complaint, either by mail or publication of the notice, and will have the opportunity to be heard before the court. If the court finds the debt in default, it will issue a judgment for the total amount owed, including the costs of the foreclosure process. After the judgment has been entered, a writ will be issued by the court authorizing a sheriff’s sale.

The sheriff’s sale is an auction, open to anyone, and is held in a public place, which can range from in front of the courthouse steps to in front of the property being auctioned. Sheriff’s sales will require either cash to be paid at the time of sale, or a substantial deposit, with the balance paid from later that same day up to 30 days after the sale. Non-judicial foreclosures are processed without court intervention, with the requirements for the foreclosure process established by state statutes. When a loan default occurs, the homeowner will be mailed a default letter, and in many states, a Notice of Default will be recorded at approximately the same time. If the homeowner does not cure the default, a Notice of Sale will be mailed to the homeowner, posted in public places, recorded at the county recorder’s office, and published in area legal publications.

After the legally required time period has expired, a public auction will be held, with the highest bidder becoming the owner of the property, subject to their receipt and recordation of the Deed. Auctions of non-judicial foreclosures will generally require cash or cash equivalent either at the sale or very shortly thereafter.