| Types of Foreclosure Proceedings | | | | mortgage balance cannot be made to pay the |
| When venturing into today's unsettled housing | | | | difference in a non-judicial foreclosure in many states. |
| market it helps to know as much as possible about | | | | The second important difference is the borrower's |
| foreclosures. The rights of the borrower, the | | | | right to cure the default. Non-judicial foreclosures laws |
| mortgage lender, and the eventual buyer are | | | | are more likely to allow a borrower to cure a default |
| determined by foreclosure laws, and these laws vary | | | | before their home is auctioned. Curing a default |
| by state. Despite the wide variations in state laws | | | | usually means paying any overdue payments along |
| foreclosures can be grouped into two types. Knowing | | | | with any late fees, rather than paying off the entire |
| the differences between the two types is important | | | | balance. It is also usually allowed even after the |
| in understanding foreclosures. | | | | property has been advertised for auction. |
| The two types of foreclosures are judicial and | | | | A couple of examples will help illustrate these |
| non-judicial. While not every state allows non-judicial | | | | differences. California, as one example, allows both |
| foreclosures, every state has judicial foreclosures. A | | | | judicial and non-judicial foreclosures. However, the |
| judicial foreclosure takes its name from the fact that | | | | state does not allow recourse on non-judicial |
| it is handled by the state court system. A judicial | | | | foreclosures. In such a case a borrower can walk |
| foreclosure usually ends with the property being | | | | away from any unpaid mortgage debt. Also, in a |
| auctioned at a sheriff's sale. | | | | non-judicial foreclosure, the borrower has up until five |
| A non-judicial foreclosure avoids involving the courts. | | | | days before the foreclosure auction to cure their |
| Instead, a power of sale clause in the mortgage | | | | default. |
| contract gives the mortgage lender the right to | | | | Ohio, on the other hand, is like many states in that it |
| foreclose directly if the state allows. Non-judicial | | | | has only judicial foreclosures. Ohio allows lenders |
| foreclosures usually end in an auction much like a | | | | recourse, so borrowers can be held liable if the |
| sheriff's sale. The sheriff only gets involved if an | | | | foreclosure auction fails to pay off their mortgage. |
| eviction is necessary. | | | | Also, once the clerk of courts has listed a foreclosed |
| There are several things that make the difference | | | | property for sale it is too late for the borrower to |
| between these two types of foreclosures important. | | | | cure any default. |
| The first is recourse. Recourse is the legal right of | | | | It would be impossible to summarize the laws of all |
| the mortgage lender to recover additional money | | | | fifty states, especially since some states are |
| from the borrower if the sale of the property is not | | | | currently changing their laws in response to today's |
| enough to pay off the mortgage. Usually recourse is | | | | housing market. Anyone facing foreclosure, or |
| available to mortgage lenders in judicial foreclosures | | | | anyone considering buying a property in foreclosure, |
| but not in non-judicial foreclosures. A borrower | | | | needs to contact an attorney familiar with the laws in |
| whose home value has dropped below their | | | | that state. |