What is a foreclosure?
A foreclosure is a legal action that permits a lender to acquire ownership and title from a delinquent borrower.
The Types of Foreclosure
There are two types of foreclosure systems that follow the two types of secured real estate loans.
|There is a judicial foreclosure system in Mortgage States.|
|There is a non-judicial foreclosure system in Trust Deed States.|
|A few states allow both Judicial and Non-Judicial foreclosures depending on the loan documents.|
Length of Time Pre-foreclosure
The length of time from commencement of the legal action to the legal sale of the property varies greatly from State to State. See below. This is broken down into the time it takes to process the documents through the legal system and the number of days notice one must give of the sale by publication.
Length of Time Post-foreclosure, redemption period
A redemption period enables a borrower to pay off the loan and re-claim the property for a period AFTER the foreclosure sale. In some cases an owner of an underlying junior lien or mortgage also has this right. These times also vary greatly from state to state. From zero to about a year! This delay greatly affects your ability as an investor to take title to, fix up and rent or re-sell a foreclosure property. And for the lender to try to recover some of their money!
The IRS, by virtue of Federal law, has 120 days to redeem property. In practice they seldom do this as this means writing a check to the buyer. Sometimes they will agree to waive this redemption period.
We are not attorneys are cannot give you legal advice. We believe this information to be accurate, but please check with a qualified real estate attorney in the state in question before making any decision based on this information.
Our intent is to give you an overview and make you aware that laws differ, sometimes dramatically, from state to state. You should of course be aware of the foreclosure laws in your own state and that of any other state that you plan to lend in.
The states strike differing balances between protecting the homeowner from losing their home quickly, perhaps because of a temporary financial crisis on the one hand, and the legitimate rights of the lender to try to recover the money they have lent in good faith expecting to be paid back! How long should a borrower be permitted to live in a house without paying a dime in mortgage payments? I guess that depends if you are the borrower or the lender!
Non-judicial sales are almost always quicker than judicial sales. Lenders should always make sure their documents provide for this if possible in that state.
Some states are much more lender-friendly than others. It would be interesting to know if interest rates are lower in those states than in those like New York that drag out foreclosures for so long, costing the lender money and lost income.
State by State Foreclosure Rules
|State||Judicial or non-judicial||Process days||Sale Publication days||Redemption period||Notes|
|Alabama||Both||49-74||21||365 days||Usually non-judicial|
|Alaska||Both||105||65||365 days judicial only||Non-judicial requires 30 days default|
|Arizona||Both||102||41||up to 6 months||Junior lienholders can also redeem|
|Arkansas||Both||70||30||365 days judicial only||Property must be sold for 2/3 appraised value|
|California||Both||117||21||365 judicial only||Non-judicial more common.|
|Colorado||Non-judicial||91||14||75||Judicial foreclosures not usual. Lender must still obtain a court order after sale is scheduled.|
|Connecticut||Judicial||62||N/A||Judge decides||Winning bidder at foreclosure auction has 30 days to pay. Type of foreclosure depends if equity in property.|
|Delaware||Judicial||170-210||60-90||None. But borrower could contest the sale.||Sale can be held at courthouse or property by sheriff.|
|DC||Non-judicial||47||18||None.||Sale conducted by licensed auctioneer, usually at their office.|
|Florida||Judicial||135||NA||None||Sale date about 30 days after judgment. If borrower cannot be served in person, guardian at litem must be appointed. Sale by clerk of court.|
|Georgia||Non-judicial||37||32||None||No right to reinstate mortgage.|
|Idaho||Non-judicial||150||45||365 judicial only, otherwise none|
|Illinois||Judicial||300||NA||90||Court has to confirm sale after full bid price paid.|
|Indiana||Judicial||260||120||None||The pre-foreclosure delay depends on the age of the mortgage.|
|Iowa||Judicial||160||30||20-365||Redemption time depends on various factors, including whether or not the lender has waived a deficiency judgment.|
|Kansas||Judicial||130||21||90-365||365 days redemption if 1/3 of principal has been paid|
|Kentucky||Judicial||147||NA||365||Lender can re-possess immediately if house abandoned. Redemption period only if house sells for less than 2/3 of appraised value.|
|Louisiana||Judicial||180-270||NA||None||Two types of foreclosure. Ordinary and executory. Executory quicker and requires authentic act that includes borrowers confession of judgment.|
|Maine||Judicial||240||30||90||Lender must serve default notice on borrower. Borrower has 90 days after judgment to stay in house and pay off mortgage.|
|Maryland||Judicial||46||30||Court decides||No need for lender to inform borrower of foreclosure until sale date is set by court. Sale conducted by licensed auctioneer.|
|Massachusetts||Judicial||75||41||None||Must get ruling from land court that borrower not protected from foreclosure by Soldiers and Sailors Relief Act. Borrower entitled to any surplus if property sold for more than loan amount. Licensed auctioneer sells.|
|Michigan||Both||60||30||30-365||Usually non-judicial. Sheriff sells property.|
|Minnesota||Both||90||7||180-365||Usually non-judicial. Usually 180 redemption period. But depends on property type and wording of mortgage.|
|Mississippi||Both||90||30||None.||Usually non-judicial. Trustee sells property. Surplus of sale proceeds goes to secondary lenders.|
|Missouri||Both.||60||10||365||Usually non-judicial. Borrower must be served notice of default. Redemption allowed only if the lender was the successful bidder. Cumbersome procedure for redemption.|
|Montana||Both||150||50||None||Usually non-judicial. Trustee sells property. No deficiency judgment allowed.|
|Nebraska||Judicial||142||NA||None||Non-judicial much quicker. Needs Deed of Trust. With non-judicial, borrower has 30 days after being given notice to reinstate loan.|
|Nevada||Both||116||80||None||Non-judicial much more common. Lender begins foreclosure by filing notice with court and mailing borrower.|
|New Hampshire||Non-judicial||59||24||None||Most mortgages require lender to give borrower 30 days notice of default. Sale usually at the property.|
|New Jersey||Judicial||270||NA||10||30 days written notice given to reinstate mortgage. Sale at courthouse by sheriff.|
|New Mexico||Judicial||180||NA||30-270||Winning bid must be at least 80% of fair market value of property. Usually 30 days for borrower or other lien holder to redeem.|
|New York||Judicial||445||NA||None||Need a court ruling that can take 7-9 months. The sale set for 4 months later.|
|North Carolina||Both||110||25||None||Non-judicial more common. Sheriffs sale. Borrower given 10 days notice of hearing before clerk of court.|
|North Dakota||Judicial||150||NA||180-365||Lender must give borrower 30 days notice of intent to foreclose. Borrower can reinstate by making up back payments. Borrower usually has 180 days after the sale to redeem property. Failing which is transferred to bidder.|
|Ohio||Judicial||217||NA||None||Borrower can be served in person or by certified letter. Advertised if borrower cannot be found. Sales price must be 2/3 of the appraised price. Sheriffs sale.|
|Oklahoma||Both||186||NA||15||Judicial more common. Lender files in court and notice of action served on borrower. Borrower has 20 days to respond. If appraised then opening bid must be 2/3 of appraisal. Sheriffs sale.|
|Oregon||Both||150||30||None-180||Non-judicial more common. Trustee sells. Borrower can reinstate up to 5 days before sale by paying off back payments and costs. No redemption period with non-judicial foreclosure.|
|Pennsylvania||Judicial||270||NA||None||Cannot start foreclosure till 60 days late. Borrower has 2-4 months to try to solve problem before lender continues. Borrower can prevent sale by paying off full amount owed up to 1 hour before the sheriffs sale.|
|Rhode Island||Both||62||21||None||Non-judicial more common. Attorney must give borrower at least 20 days notice before advertising sale weekly for 3 weeks. Auctioneer sells.|
|South Carolina||Judicial||150||NA||None-30||Lender files lis pendens in court. With 20 days borrower must be personally served. Borrower has 30 days to respond. Hearing officer handles for court. No redemption period if lender waives deficiency judgment. Otherwise 30 days for another bid to be given.|
|South Dakota||Both||150||23||60-180||Judicial more common. No need to mail default notice, but borrower has 30 days to respond to court filing. Borrowers and lien holders have 6 months to redeem unless property vacant, then 2 months.|
|Tennessee||Non-judicial||40-45||20-25||None-730||Most trust deeds provide no right to redeem. If not included borrower has TWO YEARS. Trustee sale.|
|Texas||Both||50||NA||None||Non-judicial more common. Lender gives borrower 20 days notice to reinstate. Then can foreclose. Must give borrower 21 days notice of sale. Trustee sale.|
|Utah||Both||110||30||None||Non-judicial more common. Foreclosure started by filing notice with court and mailing to borrower. Borrower has 3 months to reinstate. Then must publish sale weekly for 3 weeks. Auction at courthouse.|
|Vermont||Both||95||NA||90 but varies||Usually non-judicial. Borrower may reinstate prior to the sale by paying back payments and costs. Borrower receives notice of sale 60 days prior.|
|Virginia||Both||45||14-28||None||Non-judicial more common. Borrower gets 30 days notice to reinstate. Lender may pursue deficiency judgment. Trustee sale.|
|Washington||Both||135||90||None||Non-judicial more common. Lenders mails notice of default and either personally serves on borrower or posts the property. Notice of sale recorded 90 days before actual sale. Sale advertised twice. For court foreclosures, 1 year right of redemption, otherwise none.|
|West Virginia||Both||60-90||30-60||None||Non-judicial more common. 10 days notice to reinstate. May not be able to reinstate if served default 3+ times. Borrower can thereafter pay off entire loan any time before the sale.|
|Wisconsin||Both||290||NA||60-365||Judicial more common. Sheriffs sale. 2 month redemption period with abandoned properties. If property sells for less than judgments, sale will not be confirmed unless court is satisfied fair market value of property is credited to mortgage.|
|Wyoming||Both||60||28||90||Non-judicial more common. Sale published once per week for 4 weeks. Sheriffs sale at courthouse. To redeem must pay winning bid plus 10% interest and property taxes owed|