When one purchases a real estate property and takes out a mortgage, he has to sign a contract agreeing to pay a specific amount each month for a set number of years. A foreclosure occurs when a borrower starts falling behind on his several mortgage payments or fails to fulfil other contract provisions. There are two main ways by which a property can be foreclosed on: judicial foreclosure and non-judicial foreclosure.
Judicial Foreclosure is the legal process allowing lenders to take control of the property used as security to pay off the debt and to sell it to recover the amount owed on a defaulted loan. Essentially, a judicial foreclosure means a sale approved by the court. With a judicial foreclosure, the lender must file a lawsuit in the court and get a court order for a foreclosure sale.
In a real estate property, judicial foreclosure occurs when a debtor defaults on his mortgage. The lender files a lawsuit and the borrower will be served with a foreclosure complaint notifying him of the legal proceedings. The homeowner has the choice either to fight the foreclosure in court or allow the foreclosure to happen. The debtor has a timeline to make up the missed payments. If no settlement happens between the lender and the borrower and the court rules go in favour of the lender, the foreclosure process proceeds.
Here are some of the main features of judicial foreclosure:
Most of the time the judicial foreclosure process takes a long time and the timeline involves several steps that allow the lenders time to apply for loss mitigation to avoid foreclosure.
In judicial foreclosure sometimes the complaint is called a Petition to Foreclose. The party is notified that a complaint is filed against them and given a chance to pay the accelerated amount which means the full amount of the loan plus costs.
A judicial foreclosure may happen when the borrower is unemployed, deep in debt or has any accident or illness.
Though every state allows a judicial foreclosure but not the non-judicial one, the procedures of judicial foreclosure vary by state.
In some circumstances, a lender prefers judicial foreclosure as it allows to resolve complex issues regarding disputes over the title of the property.
A judicial foreclosure should be avoided by communicating with the mortgage lender which will ultimately save the property owner from devastating financial consequences.
