Understanding Judicial Foreclosure
Foreclosure is one of the most severe and difficult financial processes for any consumer.Unfortunately, foreclosures are also peaking, meaning thousands of American families are nowfacing this dire consequence. What does it mean, and what can you do to avoid foreclosure?
What is Foreclosure?
Foreclosure is the legal process through which a lender (most typically a mortgage lender) claimsan asset from the consumer borrower. Foreclosure is almost always the result of default on payment. A very important consideration for mortgage payment is that lenders cannot take partial payment on the mortgage monthly payment. What that means is that, unlike a credit card,you cannot mail in a portion of your payment… a mortgage payment is all or nothing. This alsomeans that if you miss one payment, the next month you have to re-pay the current month and allarrears! This, in addition to exotic mortgage products and rising rates, can drive many otherwisefinancially stable people into foreclosure.There are two types of foreclosure: judicial and non-judicial foreclosure.
A judicial foreclosure basically means that the foreclosure is a court ordered legal process.Instead of a trustee, the foreclosure actual moves (sometimes moves very slowly) through thecourt system. In states that use a judicial foreclosure process, the mortgage deed or mortgage liendoes not have a forced power of sale clause… so the lender has to formally take the homeowner to court. This can help by buying you some time.
Non-judiciary Foreclosure, or Statutory Foreclosure:
Many states avoid the judicial foreclosure process, and instead, the mortgage lender notifies the borrower with a notice of default. Since the mortgage loan terms already specify that a sale process kicks off right away (without going through the court system) – the lender can start theforeclosure process very quickly. Then the borrower has a fixed period of time (which varies