Does it matter whether a property foreclosure is being pursued within a judicial state or a non-judicial state? You bet it does!
For those who may be unfamiliar with the difference between judicial and non-judicial foreclosures, the short answer has much to do with time. Lots and lots of time. And, as we say in the business, time is money!
Here are the descriptions for both the judicial and non-judicial foreclosure process provided by the Mortgage Bankers Association:
A judicial foreclosure is a court proceeding that begins when the lender files a complaint and records a notice in the public land records announcing a claim on the property to potential buyers, creditors and other interested parties. The complaint describes the debt, the borrower’s default and the amount owed. The complaint asks the court to allow the lender to foreclose its lien and take possession of the property as a remedy for non-payment.
The requirements for non-judicial foreclosure are established by state statute; there is no court intervention. When the default occurs, the homeowner is mailed a default letter and in many states a Notice of Default is recorded, at or about the same time. The homeowner may cure the debt during a prescribed period; if not, a Notice of Sale is mailed to the homeowner, posted in public places, recorded at the county’s recorder’s office, and published in area newspapers/legal publications. When the legally required notice period (determined by each state) has expired, a public auction is held and the highest bidder becomes the owner of the property, subject to recordation of the deed. Prior to the sale, if the borrower disagrees with the facts of the case, he or she can try to file a lawsuit to enjoin the trustee’s sale. (Source)
Tale of the Time and National Foreclosure Statistical Overview!
In the first quarter of 2013 the average length of time to go through the foreclosure process in the State of New York, a judicial state, was 1,049 days.
Alternatively in California, a non-judicial state, the average amount of time to foreclose for a $450,000 home is a little over 500 days.
To examine the per state foreclosure statistics as well as other foreclosure metrics please read a great analysis provided in the CoreLogic National Foreclosure Report, April 2013 here.
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Michael – – –
Many who have not gone through a foreclosure don’t realize the significance of the 500 days to complete foreclosure (non-judicial process) and 1,000 + days means that many of the millions going through foreclosure end up living in the home “rent-free” for 1 1/2 to 3 years. That is a “back-door stimulus” as the foregone mortgage payments can be spent for consumer items. Property tax payments (and possibly homeowners premiums) may similarly be redirected. Of course the “stimulus” for consumer spending is offset by the reduced payments to the mortgage holders and insurance providers, which constitute an economic headwind.
As someone familiar with people undergoing the task as the foreclosing entity, well over 1,000 to get the process completed in New York can be fiscally debilitating for a lender. Thanks for stoping by John!