Prevent Foreclosures

Posts Tagged ‘nonjudicial’

Most homeowners much prefer the process of judicial foreclosure but, in some states, they do not have the choice of choosing one or the other.  In California, for example, nonjudicial foreclosure is common and when you buy a home in California, you have to sign a promissory note and a deed of trust. Most people do not know the implication of signing a promissory note or a deed of trust at the time of buying a home. Many think that a deed of trust is just another word for a mortgage. However, legally, a deed of trust is very different from a mortgage.

Consequences of Signing a Deed of Trust

In deed of trust states, such as California, when you buy a home, you usually have to sign a deed of trust. If the borrower defaults on the loan or fails to comply with the terms of the deed of trust agreement, then the deed of trust would authorize the trustee to:

• declare the whole amount of balance of the loan due immediately
• sell the property at a public auction

With a deed of trust, the power is in the hands of the lender, unlike a mortgage where the mortgage lender has to go to court to first to start the foreclosure process.

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You might have heard the term Judicial foreclosure and Nonjudicial foreclosure. They are different processes of foreclosure. One is in court and the other is out of court. Some states allow both judicial foreclosure and nonjudicial foreclosure whereas others may allow only one type. Knowing about different types of foreclosure can help homeowners avoid foreclosure.

What is Judicial Foreclosure? (in court)

A Judicial foreclosure usually occurs when your home loan is secured by a mortgage (as opposed to deed of trust). A judicial foreclosure usually takes longer than a nonjudicial foreclosure. A homeowner in judicial foreclosure, therefore, has longer to come up with ways to prevent foreclosure. Since the court is involved in this process, it ensures that homeowners are less likely to be taken advantaged of by mortgage lenders.  A judge has to sign off on this type of foreclosure.

What is Nonjudicial Foreclosure? (out of court)

When a home loan is secured by a deed of trust, rather than a mortgage, then the foreclosure process can be achieved without the involvement of the court or a judge. Having a deed of trust is worse than having a mortgage in many cases. A deed of trust authorizes the trustee, usually your lender or a title insurance company, to foreclose on the property in case of a default on payment. The lender can then foreclose on your home without the trouble of having to go to court. This can make foreclosure easier and cheaper for them.