DIFFERENCES BETWEEN JUDICIAL AND NON-JUDICIAL FORECLOSURE PROCESSES

From the inception of a new mortgage loan, all lenders and servicers must follow both federal AND state procedure throughout the entire mortgage servicing process. Mortgage servicing is the process of collecting payments from a borrower. Federal and state foreclosure processes must also be followed because those processes are built into laws, or statutes, which are often referred to as “rules”. Each state maintains its own rules regarding notice requirements, timelines for performance, sale procedures, rights to redeem the property and eviction.

There are two types of rules governing how a mortgage is serviced which can be easily determined by the type of loan contract document, a mortgage or a deed of trust, a borrower has signed.

In states where all aspects of the loan are required to be enforced by a court or a judge, the lender must write the mortgage contract, and the borrower must sign the MORTGAGE. The states that require a MORTGAGE as the contract are called JUDICIAL states and any foreclosure process must go through the court before a judge and a JUDICIAL process.

In those states that the mortgage loan agreement is enforced by a Trustee, the lender must issue, and the borrower must sign, a DEED OF TRUST. The states that require a DEED OF TRUST contract are called NON-JUDICIAL states and any foreclosure process must go through the TRUSTEE and a NON-JUDICIAL process. While not required, some lenders have begun filing foreclosures in courts in states where the NON-JUDICIAL process takes an exceptionally long time to complete.

In both JUDICIAL and NON-JUDICIAL foreclosure states lenders and servicers are required to adhere to all the federal statutes governing mortgage loans from inception, through servicing and if necessary into foreclosure. Most of those federal rules can be found in Title XII and Title XV of the United States Code, or USC, and almost every state has replicated those statutes as state laws, providing borrowers the rights and abilities to bring law suits against lenders at their choice of the state or federal courts.

In general, the timeline in a NON-JUDICIAL foreclosure process is shorter than the timeline of a JUDICIAL foreclosure process.

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