Judicial vs Non Judicial Foreclosure: What’s The Difference?

By: ROS Team

When homeowners face the threat of foreclosure, understanding the process is crucial. There are two main types: judicial and non-judicial foreclosure. Each follows different steps and has unique impacts on both lenders and borrowers. Knowing the differences can help homeowners navigate these challenging situations better and make informed decisions about their financial future.

Judicial vs Non Judicial Foreclosure

When a borrower fails to meet mortgage payments, the lender may decide to foreclose on the home. And for this, he or she may choose either judicial foreclosure or non-judicial foreclosure. Let’s understand both of these:

What Is a Judicial Foreclosure?

A judicial foreclosure is a legal process where the lender must go to court to get approval to foreclose on a property. This type of foreclosure happens when the lender (mortgagee) proves that the borrower (mortgagor) has failed to make mortgage payments as agreed.

During a judicial foreclosure, the court carefully reviews the documents submitted by the lender. The court checks if the lender’s claim for foreclosure is valid and justified. If the court finds that the borrower is truly behind on payments, it will issue a judgment against the homeowner. This judgment allows the lender to sell the property at a foreclosure auction.

How Judicial Foreclosures Work?

Judicial foreclosures work through a series of steps:

Initial Contact: First, the lender contacts the borrower about missed payments or debt issues.
Filing a Lawsuit: If the borrower does not respond or cannot resolve the debt, the lender files a lawsuit against them. This initiates the judicial foreclosure process in court.
Court Summons: The borrower receives a court summons. They can either let the foreclosure continue without contesting it, or they can appear in court to fight it.
Review of Evidence: The judge looks at evidence from both the lender and the borrower. There may be a hearing to determine if the homeowner has defaulted on their loan.
Court Decision: If the court sides with the lender, the judge orders that the property be sold to pay off the debt owed.

What Is a Non Judicial Foreclosure?

A non-judicial foreclosure is a process where a lender forecloses the property without going to court. Instead of legal action, the lender follows steps outlined in the mortgage or deed documents.

First, the lender sends a notice to the borrower saying they have missed payments. If the borrower still does not pay, the lender can sell the property at a public auction. This process usually moves quickly and costs less than a judicial foreclosure in court. However, the borrower has fewer chances to fight the foreclosure.

How Non-Judicial Foreclosures Work?

Notice of Default: The lender issues a notice of default to the borrower, informing them of the default and the intention to foreclose.
Borrower’s Response Period: The borrower is given a specified period to cure the default by paying the overdue amount.
Notice of Sale: If the borrower fails to cure the default, the lender issues a notice of sale, announcing the date, time, and location of the public auction.
Public Auction: The property is sold at a public auction to the highest bidder.
Transfer of Ownership: The highest bidder receives a trustee’s deed, transferring ownership of the property to them.

Judicial vs Non Judicial Foreclosure: What’s the Difference?

Non judicial and Judicial foreclosures differ primarily in their processes, timeframes, and costs.

Judicial Foreclosure:

Process: Involves court proceedings where the lender files a lawsuit against the borrower.
Timeframe: Considerably lengthier, taking anywhere from six months to three years due to court involvement. This gives the borrower more time to resolve the debt.
Notice of Default: Issued by the court after the lender proves the borrower’s default.
Court Judgment: If the court rules in favor of the lender, it orders the sale of the property to satisfy the debt.

Non-Judicial Foreclosure:

Process: Conducted without court involvement, following the terms specified in the mortgage or deed of trust.
Speed and Cost: Typically, it is much faster and cheaper for the lender, as it bypasses the court system.
Notice of Default: Issued by a trustee, informing the homeowner of the default and intent to foreclose.
Auction: The property is sold at a public auction to the highest bidder.

In summary, non-judicial foreclosures are quicker and less costly but offer fewer protections to the borrower, while judicial foreclosures are more time-consuming and expensive but provide the borrower with greater legal protections and opportunities to contest the foreclosure.

Is New York a Judicial Foreclosure State?

Yes, New York follows the judicial foreclosure process. This means the lender has to take legal action and go through court proceedings to foreclose on a property. The borrower gets an opportunity to present their case in court or make missed payments to avoid foreclosure.