Judicial Foreclosures

In states with this system, foreclosure can only take place through court action. The process usually begins when the home owner falls behind on his or her mortgage payments due to one of the several reasons described in the Introduction (divorce, health issues, loss of job, etc.). Typically, the foreclosure process goes like this:

1. A lender files a lawsuit with the appropriate court to foreclose on the mortgage or deed of trust.
2. The borrower must respond to the lender’s “complaint.”
3. A court hearing date is set.
4. On the hearing, the judge appraises the complaint and either dismisses it or orders foreclosure of the loan.
5. If the decision is for foreclosure, the judge then orders that a public foreclosure auction sale be held on a specified date.
6. The public foreclosure auction date is then advertised to the public.
7. At the auction, the property is sold to the highest bidder. Or, if there’s no acceptable bid, the property reverts back to the lender.
8. A “deficiency judgment” could be imposed against the borrower. This is a personal judgment against the borrower for the remaining balance on the loan after a foreclosure sale.
9. After the sale, the borrower does have the opportunity to exercise “statutory redemption rights.” That is, within a specified amount of time, he or she can regain the property by paying all costs and interest (in addition to the mortgage debt) to the lender.
10. Whenever the borrower doesn't exert legal redemption rights within the specified amount of time, a sheriff’s deed or certificate of title is given to the highest bidder.

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