Foreclosure is the process where a home is sold to pay off an unpaid debt. Usually foreclosures happen when a homeowner falls behind in home loan payments. In certain states, foreclosures are always judicial, which means they go through the court system. In other states, foreclosures are typically nonjudicial (out of court), although these states permit judicial foreclosures as well.
With a judicial foreclosure, the foreclosing party files a lawsuit in the county where the property is located and requests that the court grant a judgment allowing the home to be sold to satisfy the debt. Read on to learn the specifics about how judicial foreclosures work, what type of notice you’ll get in this type of foreclosure, how you can raise objections to a judicial foreclosure, and which states use a judicial foreclosure process.
Judicial foreclosures usually take longer than nonjudicial foreclosures, generally lasting from about six months to just over three years, depending on the state.
Below are the steps in a typical judicial foreclosure.
The mortgage servicer (the company that you make your payments to) cannot begin foreclosure procedures if you miss just one or two payments.
Under Consumer Financial Protection Bureau mortgage servicing rules that went into effect January 10, 2014, the servicer must wait until you more than 120 days (four months) delinquent on payments before officially starting the foreclosure. This is to ensure that you have time to apply for loss mitigation (an alternative to foreclosure).
The servicer can still send you notices informing you that you are late in payments, such as a breach letter, and/or that provide information about legal aid, counseling, or other resources.
Most mortgages contain a provision that requires the foreclosing party to send you a notice, commonly called a breach letter, letting you know that you are in default on the mortgage before it can accelerate the loan and proceed with foreclosure. (The acceleration clause in the mortgage allows the foreclosing party to demand that you pay back the entire balance of the loan if you default on the payments.)
In most cases, you’ll get 30 days to cure the default. If you don’t cure the default, the holder or servicer will proceed with the foreclosure.
To officially begin the foreclosure, the foreclosing party files a lawsuit in state court. You will learn about the suit when you are served (you receive) papers called a complaint and summons.
Complaint and summons. The complaint for foreclosure (sometimes called a “petition for foreclosure”) sets out the reasons why the judge should issue a foreclosure judgment. The summons will notify you about your rights and state how many days you get to respond to the complaint by filing an “answer” with the court. Usually you'll get 20 or 30 days. If you want to object to the foreclosure, you must file your answer within the applicable time period. (It’s easier to raise defenses in a judicial foreclosure than a nonjudicial foreclosure since you automatically get a chance to go in front of a judge.)
Judgment. If you don't respond to the lawsuit, the foreclosing party will probably get a default judgment authorizing the sale of the home. (A default judgment means that you automatically lose the case since you didn’t respond to the suit.)
On the other hand, if you file an answer with the court, the foreclosing party can’t get a default judgment. Instead, it will likely file a motion of summary judgment (where the court grants judgment in favor of the foreclosing party if there is no dispute as to the important facts of the case). If the court denies summary judgment, the case will go to trial.
The court will enter a judgment of foreclosure against you unless you have some defense or counterclaim that justifies or excuses your delinquent payments.
Deficiency judgments. Depending on the laws of your state, the foreclosing party may also be entitled to a deficiency judgment. (When a house is sold at a foreclosure sale for less than the outstanding mortgage debt, the difference between the debt and the foreclosure sale price is called the deficiency. In most states, the foreclosing party can get a personal judgment against the borrower for the deficiency. This is called a deficiency judgment. Learn more in our article on Deficiency Judgments.)
After the court issues a judgment, a foreclosure sale is set.
At the foreclosure sale, the property may be sold to a third-party, but in most cases it will revert to the foreclosing party. Sometimes, the court must confirm the sale after it takes place.
You may not have to move out of the home right away after the foreclosure sale. Generally, depending on state law, the homeowner may remain in the home until the court confirms the sale.
In some states, the homeowner gets the right to live in the home even longer during what’s called the "redemption period." (A redemption period is a period of time when the foreclosed homeowner gets the right to redeem or repurchase the home after the foreclosure. Learn more general information about the right of redemption.)
After the foreclosure sale, confirmation of the sale, or the expiration of the redemption period, the foreclosed homeowners must vacate (leave) the home or the new owner will take steps to evict them.
Foreclosures are generally judicial in the following states:
Find out more about your state's foreclosure laws by visiting our State Foreclosure Laws area.