The foreclosure process depends on whether the state uses mortgages or deeds of trust for the purchase of real property. Generally, states that use mortgages conduct judicial foreclosures. On the other hand, states that use deeds of trust conduct non-judicial foreclosures. The main difference is that the judicial procedure requires court action on a foreclosed home.
In judicial states, to foreclose, a lender must prove that the mortgagor (borrower/homeowner) is in default. Once the lender has exhausted its attempts to resolve the default with the homeowner, the next step is to contact an attorney to pursue court action. The attorney contacts the mortgagor to try to resolve the default. If the mortgagor is unable to pay off the default, the attorney files a lis pendens (lawsuit pending) with the court. The lis pendens gives notice to the public that a pending action has been filed against the mortgagor. The purpose of the action is to provide evidence of a default and get the court’s approval to initiate foreclosure.
In non-judicial states, foreclosures are based on deeds of trust that contain the power of sale clause. The clause enables the trustee to initiate a mortgage foreclosure sale without having to go to court. The trustee is typically required to issue a notice of default and notify the trustor (borrower/homeowner) accordingly about the default status. Homeowners receive a “Notice of Intent” letter informing them that a foreclosure sale will be scheduled unless the overdue debt is paid within a certain amount of time. If the debt is not paid accordingly, a “Notice of Sale” is then sent informing the homeowner that a foreclosure sale will take place at a particular time and place. No lawsuit is ever initiated by the lender and the courts are not involved.
