Understanding How Nonjudicial Foreclosure Process Works

Some states offer nonjudicial foreclosure proceedings. This process gives a lender the legal right to auction the sale of a foreclosed home without going through the courts and the legal system. When this is in motion, a borrower must file a lawsuit against the lender through the courts to stop the process. A deed of trust is all a lender needs in states offering nonjudicial foreclosure to proceed with selling the home through an auction and bypassing the court.

In a few of these states, there has to be a Power of Sale clause in the mortgage loan for them to go that route. This doesn’t happen very often, and it is typically all done with a deed of trust. The lender can get the home sold faster and with fewer expenses when they use the nonjudicial foreclosure versus going through the courts.

What is the Deed of Trust?

A deed of trust is verification the lender has a right to sell that property when it is in foreclosure. They show a record of a lien against that property. Any time a homeowner takes out a loan on a home, a deed of trust is in the possession of the lender. When the loan is paid in full, the deed is transferred to the homeowner. When the loan is in default, the Power of Sale clause can provide a lender with the legal right to sell that property if the loan isn’t current.

A deed of trust lists the criteria used by a lender to determine whether a home is in default. These terms are very specific, and they show why the lender has determined the homeowner is in default of the terms and conditions of the loan. The deed of trust also includes details about when the sale and where the sale of the property will occur. It is important for any homeowner to read through all of their original loan documents if they fear foreclosure may happen. It gives them information on what the lender can legally do regarding taking their home and selling it at an auction.

nonjudicial foreclosure

Nonjudicial Foreclosure Laws where you Reside

Each state has its own nonjudicial foreclosure laws and requirements. This information shares the steps involved the lender must take to sell the home through an auction without going through the court. For example, a certain number of notices must be sent to the homeowner. A certain number of them have to be posted at the property location and the courthouse. There may be other requirements such as posting such details in public places and publishing the information in local newspapers. All of this ensures the homeowner has ample notice of what will take place and when.

The official names of these types of notices can vary from one state to the next. Learn what these notices mean when you see them or receive them so you are aware of what is taking place. Understanding the laws where you live can help you learn about your rights and what the lender legally can or can’t do. If the lender isn’t following those steps the entire process can be voided. The lender will have to start the foreclosure process from the beginning again.

When there is a nonjudicial foreclosure process in the state where you reside, the owner doesn’t have a chance to discuss in court their side of things. They don’t get the opportunity to defend themselves or to argue they haven’t breached the loan agreement for the deed of trust. The lender has the right to address the owners as being in default and follow the state requirements to use the deed of trust as a means to sell the home at an auction once all of the required notices have been sent out or posted.

Filing a Lawsuit

When a homeowner believes a foreclosure shouldn’t be in place, they have the right to file a lawsuit against the lender. This will stop the proceedings until the lawsuit is heard in ccourt. At the very least, filing such a lawsuit can buy the owner more time to get enough money collected to bring their mortgage loan current again.

When such a lawsuit is filed, the homeowner has the burden of providing proof that the foreclosure isn’t valid. This can include showing verification they haven’t breached the original loan agreement or documentation they have paid the past due amount and the loan is now current.

The homeowner is responsible for all fees relating to filing such a lawsuit. This includes filing fees. In some states, there is a charge for the court to post a bond. The bond may cost a few thousand dollars. This bond is basically a restraining order against the lender. The applicable charges can be obtained from the courts in your state.

Homeowners must obtain 3 orders through the courts if they wish to fight the nonjudicial foreclosure.

They include:

  • Preliminary Injunction – prevents the lender from moving forward with foreclosure until the court has heard the case.
  • Permanent Injunction – prevents the lender from taking the home from the owner and selling it through an auction.
  • Temporary Restraining Order – prevents the lender from selling the home before the courts have had the opportunity to review the case filed by the homeowner.

The process may seem unfair, especially to homeowners that feel the foreclosure is a mistake or unfair. This is the only method of fighting it that a homeowner has. Often, they didn’t realize with those original loan documents they waived their right to a trial if they were to default on the loan terms. The information is in those documents but often overlooked. Borrowers are encouraged to read all the terms and conditions before they agree to any loan.

Any borrower facing foreclosure should review those original documents. They should learn about the laws in their state so they understand what the lender has the legal right to proceed with. This information also shares everything the lender must do to comply with those laws. Understanding those details can help a person save their home from being sold through nonjudicial foreclosure efforts by a lender.

If you need to talk to someone regarding your property, please feel free to us directly.

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