Judicial Foreclosure - Explained
What is a Judicial Foreclosure?
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What is a Judicial Foreclosure?
Judicial foreclosure refers to a legal court proceeding in which a mortgage lender seeks the right to seize the property of a debtholder who has defaulted on repayment. It is used when lenders make loans to debtors that are secured by real property (land), known as a mortgage. The court will issue a foreclosure order, which allows the creditor to sell the subject property at auction.
- Note: Some states allow this process without seeking as court order. This process is known as an non-judicial or administrative foreclosure.
How Does a Judicial Foreclosure Work?
In mortgage loan agreements, if a debtor defaults of the repayment of the loan, the mortgage lender can seek right to foreclosure from the court. This right allows the lender to seize the borrower's property and sell it to offset the debt. A foreclosure can be judicial or non-judicial, depending on the laws of the state. While Judicial foreclosures are processed in court, non-judicial foreclosures are processed outside the court. Many states adopt the Judicial foreclosure procedure, which protects the debtor's equity in the property and also prevents dubious acts by lenders. Once a debt that is in default is confirmed by the court, the property is sold off to pay the lender. If the property generates insufficient money, the borrower is still liable for the payment.
Judicial Foreclosure Process
There are specific legal processes for Judicial foreclosures. The basis is that the loan must be in default or the borrower delinquent on payments for a stated period (generally four months). After the four months, a lender notifies the debtor of the default in which the debtor is given a grace of 30 days to clear the plan debt. Failure to do so will invoke a foreclosure proceeding in which the court makes the decision. Depending on the state, a Judicial foreclosure can last between six months and three years.
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