There are two kinds of foreclosure proceedings in USA: the Judicial Foreclosure and Non-Judicial Foreclosure.
Judicial foreclosure is permitted in all the states of America and this happens when the lender files a civil lawsuit against the homeowner or borrower where the whole proceeding is handled by the court. This Judicial foreclosure is sub-divided into two kinds: foreclosure by sale and strict foreclosure. Foreclosure by sale awards to the highest bidder with the lender being the first or the opening bid. This kind of auction is also called as sheriff sales. With the strict foreclosure, the court sets a date when the owner need to pay the mortgage and when the owner fails to pay, the court will give the ownership of the home to the lender without the auction event.
The procedure starts when the lender files their lawsuit and at the same time files a lis pendens or LIS. Lis pendens is a record kept at the County Recorder’s Office to allow potential buyers, lenders and other interested parties to know if the pending foreclosure lawsuits. A second Notice of Foreclosure Sale or NFS is normally filed once the court has scheduled the auction period and bid amount.
The non-judicial foreclosure proceedings will allow the lender to announce to the general public and sell the property without the court participation and by following a process which is required by the State. The process is set in state laws and regulations and the non-judicial foreclosure process is also called as Statutory Foreclosure. One main requirement for the non-judicial foreclosure is when the borrower agrees to the process when they took the loan. To do this, a power of sale clause is added to the mortgage or the deed of trust, thus, allowing the third party trustee the right to sell the property when the borrower cannot make the necessary payments. With this clause, the non-judicial foreclosures are sometimes called as foreclosure by power of sale.
For States practicing the non-judicial foreclosure, the process begins when the lender filed a Notice of Default with the County Recorder’s Office, putting the homeowner and interested parties on information about the loan that may be foreclosed. The second notice called Notice of Trustee Sale is normally filed within 30 to 120 days later, depending on the State. It sets the auction date and time. There are some States where only the Notice of Trustee Sale is documented.