Got Foreclosure Trouble? Understanding Non-judicial Foreclosure

Non-Judicial foreclosure is the process by which your mortgage lender, under the specific and express terms of your mortgage, will claim a legal right to your property and proceed with having your property sold at a public auction in the absence of a formal judicial hearing or proceeding. Since the courts do not administer the foreclosure process in a non-judicial foreclosure state, the authority and responsibility lies with the trustee who must follow the strict rules governing the foreclosure and sale process in your state.

The major advantage of non-judicial process is that the mortgage lender, in most cases, is not permitted to pursue a deficiency judgment against you in the event that your property sells for less then the amount you still owe on your home loan.

How long does non-judicial foreclosure take?

A non-judicial foreclosure starts when the trustee, at the request of your lender, prepares and mails to you a legal document known as a “Notice of Default and Election to Sell”. This document, in most cases, is your official notice that because of your non-payment and default of your loan, a non-judicial foreclosure process has commenced and that the lender intends on proceeding with the sale of your home at a public auction. The proceeds of such a sale will be used to payoff your loan with the lender.

In most cases, the non-judicial foreclosure process will take between two to four months to complete leading to the sale of the property. This is your window of opportunity to attempt to stop the foreclosure process. You should know that the time period could turn out to be longer if the trustee fails to fully comply with the terms of mortgage documents or if the trustee violates any of the many rules governing the foreclosure process in your state.

What is a Notice of Default and Election to Sell?

The trustee must comply with the laws governing recording, mailing, posting the Notice of Default and Election to Sell. However, in most cases, there is no legal requirement that you receive “actual” notice of the foreclosure. This sounds surprising in light of the importance of notice in all legal proceedings. Most courts have ruled that a foreclosure is valid so long as the trustee carried out the notification procedures in compliance with your states law, irrespective of whether you were unable to learn of the notice because you were out of the state or engaged in other matters when the notice was sent to you.

What is the Reinstatement Period?

This area is often confused with the homeowners right of redemption which is completely different. Depending on your specific state law, reinstatement normally commences upon the mailing of the Notice of Default to your home and ends sometime before to the trustee’s sale of your property. The critical feature of the Reinstatement Period is that it provides you with a way to stop the foreclosure process by bringing your mortgage payments fully current again. The lender may also request that you that you reimburse them for attorney and trustee fees that they incurred in the foreclosure process.

How do I reinstate?

It is recommended that you contact the trustee immediately and inform him of your intention to reinstate and bring your loan current. You will first need to obtain from the trustee the exact amount you will need to pay to bring your loan current again. The trustee by law must provide you with this information promptly. Should you pay that amount to the trustee, he must by law immediately stop the foreclosure process. You should then receive the trustee’s notice of termination of foreclosure, which is your proof that the foreclosure proceedings have ended. The notice should also be officially recorded to protect your title to the property.

What about partial repayment?

Most lenders will NOT accept partial payment within the reinstatement period. However, you should consider this option if your lender is open to it and agrees to postpone the foreclosure and you are able to convince the lender of your ability and intention to bring the loan payments current again. Be careful though, you don’t want to be making partial payments if you think you will not be able to bring your payments current again. You could end up losing more money and still end up getting you’re home foreclosed.

It is important to be both realistic and candid with your lender. Also keep in mind that partial payment will not by itself operate to extend the reinstatement period or terminate the foreclosure process. To accomplish these concessions, your lender must agree to do so expressly and in writing.

What is the Notice of Trustee Sale?

After the Notice of Default is issued, and assuming you have not brought your loan current during the reinstatement period, the trustee will issue a Notice of Trustee Sale. The purpose of this document is to notify you and others of the exact time and date your property will be put up for sale by auction. The date of sale is typically about two-to-four weeks after you first received the Notice of Trustee Sale. You might be able to stall the process by a few weeks if you notice any material inaccuracies in the Notice of Sale and you communicate the same to the trustee in writing.

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