Highlights:

Judicial/ Non-Judicial Foreclosure: Both

Right of Redemption/ Deficiency Judgment: Depends on the Process

Timeline: 120 Days, Can vary depending on individual cases

Deed of Trust / Mortgage as Security Instruments: Both are required
Judicial Foreclosure Process:   

If the ‘Power of Sale’ Clause is not present in the Deed of Trust/ Mortgage document, the Judicial Foreclosure process is followed. In this process, a lawsuit is filed with a court and the court is required authorize the foreclosure. After that, the property is sold in a public auction to the highest bidder.

The advantage of the Judicial process to the borrower is the fact that they might be able to exercise their right of redemption (claiming for their property by paying up the dues) for up to one year, provided certain conditions are satisfied.

The lenders also have an advantage of exercising their right to claim a Deficiency judgment against the borrower if the total amount recovered by selling the property is less than the amount owed by the borrower.

Non-Judicial Foreclosure Process:

If the ‘Power of Sale’ Clause exists in the Deed of Trust or Mortgage documents, the Non-Judicial Foreclosure process is followed. The ‘Power of Sale’ is an authorization for the lender (bank) to sell off the property pledged by the borrower, in case the borrower happens to default on the loan.

The process of foreclosure can be executed by either the lender or their agent, who are generally referred to as trustees.

If the ‘Power of Sale’ mentions about the procedure to be followed for selling the property like date, time, period and other processes that need to be followed, then it is followed as such.

If the procedure is not mentioned in the ‘Power of Sale’ document, then a notice of sale needs to be mailed to the borrower at least 20 days before the actual sale proceedings and this notice should also be pasted on the property as well as at least  one public place in the county where the property is located.

The notice of sale needs to be recorded in the recording office of the county at least 14 days prior to the actual sale/ auction.

The notice of sale should contain all the details regarding the property, borrower, lender and the terms of sale. So, it should have the property address, name and address of borrower, name and address of lender, their phone numbers, terms and conditions of the foreclosure sale, etc. It should also include the intention of the lender/ trustee to sell the above mentioned property.

The borrower can pay up the outstanding amount and redeem the property for up to five days before the auction sale date. The borrower has no rights of redemption after that period, in a Non-Judicial foreclosure.

All the bidders to the property may be required to demonstrate a proof of their ability to pay their full bid amount. The auction is open to any members of the public and the property is allocated to the highest bidder. The auction should take place on a working day between 9:00 AM to 5:00 PM.

The Sale/ Auction may be postponed to a later date, if so desired by the lender. The lender needs to announce the new date and time for the next auction during the initial auction. In Non-Judicial foreclosure, lenders cannot file for a deficiency judgment.