You might have heard the term “non-judicial foreclosure” or “California is a non-judicial state” thrown around more than once. But what does that mean, exactly?
Typically, there are two ways a bank can foreclose on your properties like your primary residence or your commercial building when you’re defaulted on the payments and can’t no longer keep up. They either have to go to court, wait for a hearing date, then convince the judge to grant them the right to foreclose on the defaulted property. This is a judicial foreclosure process.
Or..
They can just foreclose on the property (after the required and legal amount of heads up) without having to go through the whole court process. This is a non-judicial foreclosure process.
The difference between these two processes can be significant depending on where you are in the timeline. Usually, a judicial process would take more time for the bank to take back the property or auction it.
So, when can they do the latter?
It all comes down to a clause in the mortgage note you signed with them when taking out a loan. This clause, in layman’s terms, allows the bank or the representing trustee to be specific, to proceed with the foreclosure process from notice to auction without having to obtain a ruling from the judge.
I know what you might be thinking. Nobody told you this before when you signed the papers, or at least, no one explained this to you to the full extends. Are you being taken advantage of?
This is where the notion of “California being a non-judicial state” becomes relevant.
In California, this is just simply how it is. When you take out a loan, you will sign an IOU (promissory note) to the bank promising to give the money back with the agreed terms and a deed of trust. This document allows the trustee to proceed with the foreclosure process without having to file a lis pendens and obtain a thumbs up from the judge. As long as the lender provides them details proof of missed payments, they’re off to send you notices and eventually host a public auction on the property.
This means that you don’t have the opportunity to “argue” with them in front of a judge like in the judicial states. And the process would, hence, take less time for the lenders.
Another important piece of information to have is unlike in judicial foreclosures, there is no redeeming the property back once it’s auctioned, especially not in California.
Once it is done, it is done.
So, be wary of someone that says they can do otherwise!
Once the property got auctioned in a non-judicial case, the next best action to take would be figuring out how much surplus fund there is, if any, and how much you would be entitled to. If by any luck there is (or even if you feel like there should be), immediately reach out to an attorney or surplus fund recovery specialists like us to fight and claim as much money as possible for you.