Judicial Foreclosure

If you can’t make your mortgage payments, your lender may increase the pressure to make sure you pay. After continuing to miss payments, the mortgage lender may begin the foreclosure process. The judicial foreclosure process still gives you chances to avoid losing your home, but you have to act quickly.

Foreclosure laws are different in every state. If your lender begins the foreclosure process and you want to know your options, talk to a judicial foreclosure attorney for legal advice.

What Is Foreclosure?

Foreclosure is the legal process where the lender tries to recover the balance of the money owed by forcing a borrower out of the house and selling the property. Different states have different ways lenders can foreclose on properties. Depending on state law, different types of foreclosure options include:

• Judicial foreclosure
• Nonjudicial foreclosure (power of sale)
• Strict foreclosure

All states allow judicial foreclosure, and most states allow nonjudicial foreclosure, including California, Georgia, and Virginia, but only a few states recognize strict foreclosure.

If your mortgage agreement contains a power-of-sale clause, your lender can begin foreclosure without going through the legal system. There are still restrictions for notifying you with a notice of sale and a waiting period before the foreclosure sale can go through. Power-of-sale foreclosures help lenders because they are faster than judicial foreclosure.

Strict foreclosure is less common and only recognized in Connecticut and Vermont. The lender files a claim against the borrower and gives them a certain amount of time to pay the mortgage. If the borrower can’t pay, the house automatically transfers to the lender without a foreclosure auction.

What Is the Judicial Foreclosure Process?

In a judicial foreclosure state where the lender doesn’t have a power-of-sale clause, the foreclosure has to go through the court system. This is also known as a sheriff’s sale. In some cases, even if the state does allow nonjudicial foreclosure, the bank may still want to file a judicial foreclosure complaint if there is a problem with the deed of trust.

Many homeowners still have equity in the property, even if they missed payments. A judicial foreclosure is a way to protect that equity. But if the money from the foreclosure sale is not enough to pay off the mortgage debt, you may still be responsible for the balance in a deficiency judgment.

The foreclosure process starts when a homeowner misses a mortgage payment. If you can’t make payments, your lender will likely contact you. This may be your first chance to take action to save your property. You may be able to negotiate a loan modification or other payment options to stay in the property until your financial situation improves.

You may be able to contact a Housing and Urban Development (HUD)-approved housing counselor to understand your options and find a way to stay in your home.

After 120 Days

If you are delinquent in your mortgage payments for more than 120 days, your lender will send a breach of contract notice to you warning that you have 30 days to fix the underpayment. If you cannot pay, your lender will send you through the judicial foreclosure process. The lender files a foreclosure action with the court.

Your property will usually be sold in a foreclosure auction to the highest bidder. Some states provide a statutory redemption period, where a buyer can reclaim their property by paying the foreclosure sales price or the total amount owed to the lender.

After the sale and right of redemption period ends, the new owner can start the eviction process to clear out the homeowners. At that point, it may be too late to reclaim the property.

How Can I Avoid Foreclosure?

There may be alternatives to foreclosure for some homeowners. These may allow you to keep the equity in the property, avoid having to pay the deficiency, or give you extra time to get your financial affairs in order. Alternatives can include:

• Special forbearance (temporary payment reduction or suspension)
• Chapter 13 bankruptcy (reorganizing your debts to allow you to catch up on late mortgage payments)
• Mortgage loan modification (reduce payments or refinance debt)
• Pre-foreclosure sale (sell the property and pay off any lender debts)
• Deed-in-lieu of foreclosure (negotiate with the lender to give back the property in exchange for erasing your debts)
• Short sale (where the lender accepts a reduced sales price)

How Can a Foreclosure Lawyer Help?

Foreclosure can be stressful and unfamiliar. After getting notice of default, you can still pay off the debt or keep your property. There may be alternatives to foreclosure or ways to negotiate a way to stay in your home and make whatever payments you can.

A foreclosure lawyer can review your financial situation, explain your options, and negotiate with the lender for the best outcome. Talk to a judicial foreclosure attorney to find out what you can do after getting a foreclosure notice.