The document outlines the differences between judicial and non-judicial foreclosure processes across various states in the U.S. It highlights how foreclosures are initiated, legal requirements, and options available to homeowners in default, including the potential for bankruptcy and the classification of properties as real estate owned (REO) if auctions fail. Additionally, it indicates that 25 states practice both types of foreclosures, while 20 states have exclusively judicial foreclosures, and five practice non-judicial foreclosures only.

1. Foreclosure Laws The differences between judicial and non-judicial foreclosures

2. Foreclosure Laws The only way for homebuyers to know for sure which foreclosure laws apply to them is to research the foreclosure laws in their state. The type of home loan the homeowner defaulted on may also be an indicator of which foreclosure laws are being followed. For example, a judicial foreclosure may involve a mortgage while a non-judicial foreclosure may involve a deed of trust.

3. Foreclosure Laws Some states practice both foreclosures . In these states, the type of foreclosure process depends on whether the homeowner signed a loan containing a Power of Sale clause. When a homeowner signs a deed of trust containing a power of sale clause, the homeowner is waiving the right to a judicial process if the home loan goes into default.

4. Judicial Foreclosures There are 20 states that practice judicial foreclosures only: Connecticut, Delaware, Florida, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Pennsylvania, South Carolina and Vermont.

5. Judicial Foreclosures The judicial foreclosure process begins when the homeowner fails to make mortgage payments. The lender issues a Lis Pendens , which alerts the homeowner of its intent to sue in order to foreclose on the property. To stop foreclosure , homeowners may pay back their loans in full, apply for loan modifications, file for bankruptcy or sell their homes as foreclosure short sales .

6. Judicial Foreclosures If the homeowner does not alleviate the defaulted mortgage within a reasonable amount of time, the lender sues the homeowner. If the lender is able to sufficiently prove that the homeowner defaulted on the mortgage, the judge will issue a Notice of Foreclosure Sale (NFS) . This allows the home to go into foreclosure and be listed for sale at auction.

7. Bankruptcy Foreclosures The judicial foreclosure process is not the only type of foreclosure sale processed by a court. Bankruptcy foreclosures may also require homebuyers to work with court officials to buy homes. Bankruptcy homes are heavily governed by bankruptcy courts and court-appointed trustees, so buying a bankruptcy property may require court approval.

8. Non-Judicial Foreclosures There are only five states that practice non-judicial foreclosures exclusively. These states include Michigan, New Hampshire, Tennessee, Utah and West Virginia. Washington D.C. also practices non-judicial foreclosures. However, the bordering state of Maryland practices judicial foreclosures only.

9. Non-Judicial Foreclosures Similar to the judicial foreclosure process, the non-judicial foreclosure process begins when a homeowner defaults on the deed of trust. The lender issues a Notice of Default (NOD), which alerts the homeowner of the defaulted loan. This allows homeowners time to alleviate their defaulted loans or sell their homes as short sale foreclosed homes .

10. Non-Judicial Foreclosures If the homeowner fails to alleviate the default in the allotted amount of time, the lender will issue a Notice of Trustee Sale (NTS) . This alerts the homeowner that the lender has allowed a trustee to list the home for sale at auction. At this stage of the foreclosure process, the home has officially gone into foreclosure.

11. Auction and REO Foreclosures Keep in mind that some judicial foreclosure states require homebuyers to prove their ability to pay in court before their home sales can be finalized. Homebuyers who do not plan on buying foreclosure homes entirely in cash should try to get pre-qualified for home loans. In both judicial and non-judicial foreclosure states, auction homes that do not sell become REO properties .

12. Auction and REO Foreclosures A foreclosure may not sell at auction if it fails to meet an adequate minimum bid or the lender itself purchases the home. Some lenders , such as major banks and government agencies, have departments dedicated to selling REO properties . Lenders that don’t have REO departments may turn to third party real estate agents to sell their REO homes.

13. Let's Review The foreclosure process practiced in each state may be either judicial, non-judicial or both depending on state and local laws. A judicial foreclosure usually deals with a defaulted mortgage, while a non-judicial foreclosure is over a defaulted deed of trust. If the home loan contains a power of sale clause, the homeowner forfeits the right to a judicial foreclosure process.

14. Let's Review There are 25 states that practice both judicial and non-judicial foreclosures: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Georgia, Hawaii, Idaho, Iowa, Minnesota, Mississippi, Missouri, Montana, Nevada, North Carolina, Oklahoma, Oregon, Rhode Island, South Dakota, Texas, Virginia, Washington, Wisconsin and Wyoming.

15. Let's Review There are 20 states that practice judicial foreclosures exclusively. The judicial foreclosure process begins when the homeowner defaults on the mortgage. The lender issues a lis pendens , which alerts the homeowner of the default and the lender’s intent to sue. Homeowners have a few options to alleviate their defaults, including selling their homes as pre foreclosures .

16. Let's Review If the homeowner in a judicial foreclosure proceeding fails to alleviate the defaulted loan within a reasonable amount of time, the lender sues the homeowner. If the lender is successful in proving the homeowner’s default in court, the judge issues a notice of foreclosure sale. Similar to judicial foreclosures, bankruptcy foreclosures may also be heavily regulated by court officials.

17. Let's Review In addition to Washington D.C., there are only five states that practice non-judicial foreclosures exclusively. The non-judicial foreclosure process begins when a homeowner defaults on a deed of trust. The lender issues a notice of default. If the default is not alleviated during the pre-foreclosure period, a notice of trustee sale is issued, and the home is listed at auction.

18. Let's Review Once a notice of foreclosure sale or notice of trustee sale has been issued, the home is scheduled for a sale date at auction. Auction foreclosures that fail to sell become the properties of their lenders as REO homes. Some homes that are REOs were purchased directly by their lenders.

19. Let's Review REO properties that were purchased by their lenders may be sold as bank foreclosures or government foreclosures if these lenders have departments dedicated to selling REO houses. Real Estate Owned properties that are owned by smaller lenders may instead be sold by third party real estate agents.

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