Judicial vs non-judicial

[Sweetpea3829]

I've been reading along here and there and see frequent mention of judicial vs nonjudicial and how it plays out in regards to a foreclosure and generally, how long a person would have from start of nonpayment until foreclosure sale is complete.

My property is in RI, which apparently handles foreclosures in either a judicial or a nonjudicial manner. How can I tell which manner my property will be handled?

If it is being handled in a judicial manner...being as how we now live in NY, will they have to schedule hearings at a court that is local to us, or will they schedule hearings in RI?
For anybody not familiar with our particular story...we are trying to modify the loan on an investment property we own in RI (a property that was discharged in a 2007 bk7)...we recently took a new job in NY and have moved. We are in the process of applying for a USDA Direct housing loan so we can purchase a home here.

If our property in RI forecloses prior to the closing of our home here in RI....we're screwed...the USDA loan will fall through. If the USDA loan closes, we're fine...if LBPS refuses to modify the loan on the property in RI, than so be it...as long as it's after we've closed on our new home here in NY.

[justbroke]

You can only tell this by reading your entire security instrument (mortgage) and seeing if it has a "power of sale" clause. This is the only way that the property can be foreclosed upon using the non-judicial method of foreclosure.

[Sweetpea3829]

Luckily....I actually have that document and will take a look tonight. If it does not contain a power of sale clause...than we're likely looking at quite some time before an actual foreclosure. LBPS took the servicing over last fall and just sent out the demand letter...the one that states we must pay the arrears by x date or the entire balance will be due...I think it's called an acceleration?

From here until foreclosure sale date...assuming they must use judicial...should be some time then...yes?

[justbroke]

Well, maybe not that much time. Judicial only delays it by weeks, not months. However, I don't have any direct experience with Rhode Island foreclosures.

[tobee43]

sweetpea,

i don't know if this may be of any help but here's a blog i did a few months ago on the subject matter:


Forclosures is YOUR state Judicial vs. non-Judicial

Tobee's Blog Entry 10/21/2010


Many people want to know if there state is a judicial or non-judicial foreclosure state. below is a description of what the terms mean and a list of the states and how each is applied.


Judicial and Non-Judicial Foreclosures

Each state in the U.S. handles it's real estate foreclosures differently, it's important to understand those differences and know your specific state's procedures. The terms used and time frames vary greatly from state to state, but the following information provides a general overview of the different processes and considerations. If you haven't done so yet, you can review our guide to each state's procedures at foreclosure procedures.

Judicial Foreclosures

Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint and recording a notice of Lis Pendens. The complaint will state what the debt is, and why the default should allow the lender to foreclose and take the property given as security for the loan. The homeowner will be served notice of the complaint, either by mailing, direct service, or publication of the notice, and will have the opportunity to be heard before the court. If the court finds the debt valid, and in default, it will issue a judgment for the total amount owed, including the costs of the foreclosure process. After the judgment has been entered, a writ will be issued by the court authorizing a sheriff's sale. The sheriff's sale is an auction, open to anyone, and is held in a public place, which can range from in front of the courthouse steps, to in front of the property being auctioned. Sheriff's sales will require either cash to be paid at the time of sale, or a substantial deposit, with the balance paid from later that same day up to 30 days after the sale. Check your local procedures carefully. At the end of the auction, the highest bidder will be the owner of the property, subject to the court's confirmation of the sale. After the court has confirmed the sale, a sheriff's deed will be prepared and delivered to the highest bidder, when that deed is recorded, the highest bidder is the owner of the property.

Non-Judicial Foreclosures

Non-judicial foreclosures are processed without court intervention, with the requirements for the foreclosure established by state statutes. When a loan default occurs, the homeowner will be mailed a default letter, and in many states, a Notice of Default will be recorded at approximately the same time. If the homeowner does not cure the default, a Notice of Sale will be mailed to the homeowner, posted in public places, recorded at the county recorder's office, and published in area legal publications. After the legally required time period has expired, a public auction will be held, with the highest bidder becoming the owner of the property, subject to their receipt and recordation of the deed. Auctions of non-judicial foreclosures will generally require cash, or cash equivalent either at the sale, or very shortly thereafter.

It is important to note that each non-judicial foreclosure state has different procedures. Some do not require a Notice of Default, but start with a Notice of Sale. Others require only the publication of the Notice of Sale to announce the sale, with no direct owner notification required. You need to know the specific procedure for your state.

State by State Foreclosure Procedures

This is a general guide only, laws change and you need to check your state statutes for accurate, up to date procedures. Foreclosure type will most often be either judicial or non-judical, if you have a specific question about a state process, you can ask it on the discussion board. Months to foreclose include the legal minimum required and the probable time length once foreclosure has begun. Deficiency judgments are available in some states if the lender loses money through the foreclosure process, if it is not practical for the lender to enforce a judgment, it will be listed. Homeowner redemption after foreclosure is possible in some states, the time periods are listed where available.

STATE TYPE OF FORECLOSURE MONTHS TO FORECLOSE
MINIMUM/EXPECTED DEFICIENCY JUDGMENT REDEMPTION PERIOD
Alabama Primarily Non-Judicial 1/3 Possible and Practical 12 Months
Alaska Both 3/4 Not Practical None
Arizona Both 3/4 Not Practical None
Arkansas Both 4/5 Possible and Practical None
California Primarily Non-Judicial 4/4 Not Practical None
Colorado Both 2/5 Possible and Practical 75 Days
Connecticut Judicial/Strict 5/6 Possible and Practical None
Delaware Judicial 3/7 Possible and Practical None
District of Columbia Non-Judicial 2/4 Possible and Practical None
Florida Judicial 5/5 Possible and Practical None
Georgia Primarily Non-Judicial 2/2 Possible and Practical None
Hawaii Primarily Non-Judicial 3/4 Not Practical None
Idaho Non-Judicial 5/6 Possible and Practical None
Illinois Judicial 7/10 Possible and Practical None
Indiana Judicial 5/7 Possible and Practical 3 Months
Iowa Both 5/6 Not Practical 6 Months,if judicial
Kansas Judicial 4/4 Possible andPractical 6-12 Months
Kentucky Judicial 6/5 Possible and Practical None
Louisiana Judicial 2/6 Possible and Practical None
Maine Primarily Judicial 6/10 Possible and Practical None
Maryland Judicial 2/2 Possible and Practical None
Massachusetts Non-Judicial 3/4 Possible and Practical None
Michigan Both 2/2 Possible and Practical 6 Months
Minnesota Both 2/3 Not Practical 6 Months
Mississippi Primarily Non-Judicial 2/3 Possible and Practical None
Missouri Primarily Non-Judicial 2/2 Possible and Practical None
Montana Primarily Non-Judicial 5/5 Not Practical None
Nebraska Judicial 5/6 Possible and Practical None
Nevada Primarily Non-Judicial 4/4 Possible and Practical None
New Hampshire Primarily Non-Judicial 2/3 Possible and Practical None
New Jersey Judicial 3/10 Possible and Practical 10 Days
New Mexico Judicial 4/6 Possible and Practical None
New York Judicial 4/8 Possible and Practical None
North Carolina Non-Judicial 2/4 Possible and Practical None
North Dakota Judicial 3/5 Not Possible 60 Days
Ohio Judicial 5/7 Possible and Practical None
Oklahoma Primarily Judicial 4/7 Possible and Practical None
Oregon Non-Judicial 5/5 Not Practical None
Pennsylvania Judicial 3/9 Not Practical None
Rhode Island Both 2/3 Possible and Practical None
South Carolina Judicial 6/6 Not Practical None
Tennessee Non-Judicial 2/2 Possible and Practical None
Texas Non-Judicial 2/2 Possible and Practical None
Utah Both 4/5 Possible and Practical None
Vermont Both 7/10 Possible and Practical None
Virginia Non-Judicial 2/2 Possible and Practical None
Washington Non-Judicial 4/5 Not Practical None
West Virginia Non-Judicial 2/2 Possible and Practical None
Wisconsin Judicial varies/10 Not Practical None
Wyoming Non-Judicial 2/3 Possible and Practical 3 Months

[Sweetpea3829]

Ok...I think our contract does have the Power of Sale clause...it says, "If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security instrument without further demand and may invoke the STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law."

So I'm assuming that's the Power of Sale clause. Which means our lender can go non-judicial.

As of now, we've been sent the notice of acceleration...what comes next? A lis pendens? What the heck is a lis pendens? Just trying to get a ball park for how much time that property has and still trying to figure out a way to stall if we don't have more than two or three months.

[tobee43]

Ok...I think our contract does have the Power of Sale clause...it says, "If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security instrument without further demand and may invoke the STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law."

So I'm assuming that's the Power of Sale clause. Which means our lender can go non-judicial.

As of now, we've been sent the notice of acceleration...what comes next? A lis pendens? What the heck is a lis pendens? Just trying to get a ball park for how much time that property has and still trying to figure out a way to stall if we don't have more than two or three months.

Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint and recording a notice of Lis Pendens. That's usually the first step.

However, Rhode Island is BOTH....Judicial and non-judicial so it appears your contract would lean towards Judicial...but as JB points out, it may delay it only a bit, depending on quickly your area is moving.

Most deed of trust mortgages include a power-of-sale clause as JB pointed out and you have reviewed. This clause allows the trustees in deed of trust mortgages to do non-judicial foreclosures on the property.

Our home is in New Jersey...an Judicial only state and it's been 3 years and there is still no movement on the foreclosure process....go figure??

[Sweetpea3829]

Tobee...if they're going to go non-judicial..and I think they can...then what's the next step for them?

[tobee43]

Tobee...if they're going to go non-judicial..and I think they can...then what's the next step for them?

Here's a step by step "break down" of how it usually or is suppose to go.



Prerequisite: Deed of Trust With Power of Sale

"Contrary to popular belief, banks can't just take back a property when an owner stops making payments. In non-judicial foreclosure states, the right to foreclose and sell the property actually lies with a 3rd party, known as the trustee; who has a fiduciary responsibility to both the lender and the borrower.

When you purchase a property, ownership is transferred to you using a document known as a deed. When you take a loan (in a non-judicial foreclosure state), you sign a deed of trust, which gives this third party trustee the right to sell the home if you fail to make payments. This power of sale is what makes non-judicial foreclosure possible.
The Notice of Default

The foreclosure process is first triggered when the lender notifies the trustee that the owner is not paying their loan, as agreed. Upon receiving that notice from the lender, the trustee will issue a Notice of Default, which is typically published in the local paper, posted on the property, and recorded at the County Recorder's office. This notice provides the borrower with a period of time (varied by State), in which to either dispute the lender's claim that the borrower has defaulted on their loan, or to pay it current prior to the house being sold. Here are some of the common features of a Notice of Default:

* Puts owner and public on notice that the foreclosure process has started.
* State statutes define when a Notice of Default can be issued.
* Typically lists the default date and default amount. The default amount can be more than the loan amount in the case of a balloon payment.
* Provides lender contact information to the borrower.

The Notice of Trustee Sale

Once the owner has received the notice of default and has been given an opportunity to bring the loan current, the trustee will proceed with scheduling the auction date and time if the owner has not yet brought the loan current. The Notice of Trustee Sale sets forth that auction date, time, location, and in some States, the opening bid amount. A few states only issue a Notice of Trustee Sale, but in those states there is usually an extended period of time before the Notices of Trustee Sale is issued; and the auction notice also serves as a Notice of Default as well. Here are some of the common features of a Notice of Trustee Sale:

* Sets date, time and location of foreclosure auction.
* State statutes specify the required information, format, and procedures for Notices of Trustee Sale, as well as how the trustee sale must be conducted.
* Provides bid amount.
* The published bid amount usually equals the principal balance + past due payments + late fees + foreclosure fees.

The Trustee Sale Auction

On the date and time of the trustee sale auction, one of four things may occur with the property:

1. The auction for the particular loan may be cancelled.

This may occur because the property was sold before the auction, and therefore the loan was repaid (or partially repaid in the case of a short sale); the owner was able to refinance the loan; the owner came up with the cash to bring the loan current; or, there may have been an error made in the sale process, and the trustee has decided it would be better to restart the process.
2. The auction may be postponed to a later date and time.

Common reasons for postponement include: mutual agreement, where the borrower and lender agree to delay the sale; beneficiaries request, where the lender decides to postpone; trustees discretion, where the trustee decides to postpone, often because it can't reach the lender for bidding instructions; bankruptcy, which actually doesn't completely stop foreclosure, but instead puts a temporary stay on the sale until the lender can get a motion granted by the judge allowing them to continue the sale; and operation of law, where a court has ordered that the sale not be held.
3. The property may be Sold to 3rd.

The loan being foreclosed on was offered for sale by the trustee, and a bidder (other than the lender) ended up purchasing the loan.
4. The property was Sold to the Bank.

Remember that it is the trustee, not the bank, that sells the home. Since the lender clearly has the most to lose in the transaction, and because they are the beneficiary of any funds received from the sale, they are allow to place the first bid, and are allowed to credit bid (bid without bringing cash to the sale), up to the amount they are owed.

Before bidding at auction it is important to consider the following factors:

* Auctions open to the public—Typically held on the courthouse steps.
* Payment requirements will vary from state to state, but generally the property must be paid for, in full, at the time of the auction, and bidders are usually required to show proof of payment, typically cashier’s checks or cash, in order to qualify for bidding.
* Generally, you are not able to perform any inspections on the property, other than a visual inspection from the street or neighbors yard. Hidden work can be extensive, so auction investors need to be prepared to suffer losses from time to time.
* Subject to existing liens and encumbrances. Remember that properties aren't sold at foreclosure auction—loans are. One of the great things about foreclosure auctions is that it wipes out loans that came after the one being taken to auction. This can help clear up excess debt on the property, allowing it be resold at an affordable price point. The flip side is that the buyer is responsible for any loans or liens on the property prior to the loan being taken to auction. For example, delinquent property taxes, which are a lien on the property, are almost always the responsibility of the new owner.
* No title insurance. One of the things that can help buyers sort out what debt they might get stuck with after buying a property at a trustee sale, is a preliminary title report; which would show which existing loans and liens the buyer would be responsible for. One important thing to note is that even the best title companies make mistakes, and occasionally miss items that can have a dramatic impact on the amount owed on the property. To reduce or eliminate this risk, title companies offer homeowners and lenders a title insurance policy which agrees to defend against or pay any claims that their preliminary title report failed to show. Unfortunately, such insurance is generally not available for purchase at trustee sale.

The Trustee's Deed

Once the property is sold at auction, the property has been foreclosed. Ownership of the property is transferred to the new owner (whether the bank or a 3rd party bidder) with a Trustee’s Deed, and any secured interest in the property held by junior lienholders is wiped out.

Even though the bank or 3rd party bidder now owns the home, they may have to evict the current occupants. Eviction processes vary from state to state, and can also vary depending on whether the property is occupied by the former owners, or a renter. Lease agreements recorded after the foreclosing lien, are wiped out by the foreclosure, just like other liens and encumbrances."

[Sweetpea3829]

Hmmmm....I don't recall our property having a trustee involved....

I'm assuming that would be contained in the mortgage documents, yes? If so...I will look it over tomorrow. It's late here and time for bed.

Tobee...you mentioned earlier that it looked like they were going judicial based on what I had quoted from the contract...what makes you think it's judicial?

P.S. I am SO appreciative of the help and information! Such muddy waters to navigate! This forum has been so incredibly helpful to us over the last few years.

[ryan]

TOBEE43: Thats a great list of FC data, state by state!....what research - Thanks. Maybe that should be a sticky?

[tobee43]

Hmmmm....I don't recall our property having a trustee involved....

I'm assuming that would be contained in the mortgage documents, yes? If so...I will look it over tomorrow. It's late here and time for bed.

Tobee...you mentioned earlier that it looked like they were going judicial based on what I had quoted from the contract...what makes you think it's judicial?

P.S. I am SO appreciative of the help and information! Such muddy waters to navigate! This forum has been so incredibly helpful to us over the last few years.

well, usually, the "trustee" is the one handling your account and assigned to it.....a person, usually one of a body of persons, appointed to administer the affairs of a company, institution...that is who it is that handles the situation...or more or less the definition. i.e. someone the bank hires to take care of it. it could be a real estate company, a law firm, anyone the bank choses to take care of the sale.

the fact as JB points out is the all important "Power of Sale" clause, which means you make can and may go the non-judicial route. and usually, that route moves somewhat quicker since it does not involve the court system.however, on the other hand, with the judicial process, once again the general consensus is that it takes usually longer since it goes through the court systems, which in many times are back logged with case after case.

[tobee43]

TOBEE43: Thats a great list of FC data, state by state!....what research - Thanks. Maybe that should be a sticky?

thanks ryan... it comes up so much, although i have it on a blog, i know the question comes up for many time and again.

[Sweetpea3829]

Bright and early Tobee!

Ok...I looked over our security instrument (aka....the mortgage) and didn't see anything to indicate that there was a trustee involved in the sale of our home. Moreover...I believe the POWER OF SALE clause that's contained in our specific instrument is likely included in all RI mortgages. I may be entirely misguided with this, but the wording of it, "may invoke the STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law." leads me to believe that this specific clause is included in all mortgages but can only be executed when applicable.

But again...my legal education is minimal...and it's entirely possible I have no idea what I'm talking about. (DANG!!! I should totally include that as my signature!)

The note of acceleration from them indicates to me anyways that perhaps they are going the judicial route. But it would appear that even if they are not going the judicial route, we still have quite some time.

In other news...our RCMR (residential credit mortgage report) and third party verifications have been received by USDA and they have since asked me for a broker's opinion of the value of our home in RI as well as a copy of the deed (to verify that my husband is no longer on the title...he is the USDA applicant and cannot be on the title of another property). They have asked for copies of my rental agreements to verify assets and have indicated they are looking at our assets to determine what down payment, if any, we would be responsible for.

This is good...very good. We are *almost* through the process of eligibility with them. Then...it'll be 1-2 months of the rest of their legal property inspection stuff before we can close.

Two more quick questions...

1) If our lender for the home in RI chooses to go judicial...do they have to file in a court that is local to us here in NY? I thought I read somewhere that when an entity sues another entity, the hearing must take place local to the defendant.

2) While looking over the mortgage documents...I did come across the 1-4 Family Rider. Now...I've always known that the lender technically has the right to collect rents from our tenants while we are in default. But according to the rider...the lender actually has the right to ALL of the rents, regardless of whether we are in default or not. Naturally...we've been collecting rents right along...and using most of it to aide us in our relocation from RI to NY. What are the chances the lender may actually come after us for those rents post foreclosure, claiming the money was rightfully theirs all along?

[tobee43]

Bright and early Tobee!

Ok...I looked over our security instrument (aka....the mortgage) and didn't see anything to indicate that there was a trustee involved in the sale of our home. Moreover...I believe the POWER OF SALE clause that's contained in our specific instrument is likely included in all RI mortgages. I may be entirely misguided with this, but the wording of it, "may invoke the STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law." leads me to believe that this specific clause is included in all mortgages but can only be executed when applicable.

But again...my legal education is minimal...and it's entirely possible I have no idea what I'm talking about. (DANG!!! I should totally include that as my signature!)

The note of acceleration from them indicates to me anyways that perhaps they are going the judicial route. But it would appear that even if they are not going the judicial route, we still have quite some time.

In other news...our RCMR (residential credit mortgage report) and third party verifications have been received by USDA and they have since asked me for a broker's opinion of the value of our home in RI as well as a copy of the deed (to verify that my husband is no longer on the title...he is the USDA applicant and cannot be on the title of another property). They have asked for copies of my rental agreements to verify assets and have indicated they are looking at our assets to determine what down payment, if any, we would be responsible for.

This is good...very good. We are *almost* through the process of eligibility with them. Then...it'll be 1-2 months of the rest of their legal property inspection stuff before we can close.

Two more quick questions...

1) If our lender for the home in RI chooses to go judicial...do they have to file in a court that is local to us here in NY? I thought I read somewhere that when an entity sues another entity, the hearing must take place local to the defendant.

2) While looking over the mortgage documents...I did come across the 1-4 Family Rider. Now...I've always known that the lender technically has the right to collect rents from our tenants while we are in default. But according to the rider...the lender actually has the right to ALL of the rents, regardless of whether we are in default or not. Naturally...we've been collecting rents right along...and using most of it to aide us in our relocation from RI to NY. What are the chances the lender may actually come after us for those rents post foreclosure, claiming the money was rightfully theirs all along?

sweetpea...good morning to you!! i'm an early to bed...early to rise...doesn't necessarily make a person healthily wealthy or wise.. kinda person...

i'm sorry if i have confused you. no, you will not see usually not see anything listed in any of the mortgage documents in reference to a trustee being in charge of selling your house if you default. it's just the process of what happens when a home is foreclosed under an process of a non- Judicial foreclosure.

it's just the bank hires someone to handle the sale...and they use the word "trustee" as that person...however, that would not necessarily be mentioned at all in your mortgage docs.

i believe you answer to #1...is no, it's in the jurisdiction of the property...usually taking place in the superior court of that county's seat. so, as far as i understand it, you would have to address the situation in RI. but someone may know differently.

#2. sticky icky situation. yes, the lender has the right to collect rent. personally, if you left and vacated your primary home as a result of a foreclosure, and then rented the premises.....used the funds for personal gain while not giving that money to the lender...well....the courts, as far as i know, and of course some one may know differently, are not really pleased about that type of situation. i do believe the lender, if that clause is in the body of your mortgage docs, the lender would have the right to collect the rent. since, once you vacate the premises the bank usually takes back the property and puffs or declares ownership by changing the locks, or winterizing the property etc.