What Is a Judicial Foreclosure?

Example of a Judicial Foreclosure

Foreclosures occur when a homeowner with a mortgage fails to make payments to the lender, and the lender then sells the home to recoup their losses.

“A judicial foreclosure is a foreclosure action that has to be initiated by court action and the court oversees the foreclosure process,”  Emil Samman, partner at Romer Debbas in New York, N.Y., told The Balance in an email. “The foreclosing party would need to file a summons and complaint for the foreclosure.”

For example, if a homeowner had a $400,000 mortgage for a single-family home and was making monthly payments of $2,600. If the homeowner lost their job and stopped making payments to the lender, the lender could go to court and get an order for a foreclosure. The lender could sell the home and use the proceeds to cover the debt.

How a Judicial Foreclosure Works

Typically, a judicial foreclosure starts when a borrower defaults on the mortgage, failing to make a set number of payments stated in the terms of the mortgage.

“The lender wants possession because the proceeds from selling the house is the only way to satisfy the loan,” Jenna Zebrowski of the Law Office of Jenna Zebrowski told The Balance in an email.

The foreclosure process starts with the lender sending a notification to the borrower that states the overdue status of the loan and requests payment to bring the loan current.

“These terms may mean that an individual must pay a large enough amount to satisfy the financial institution or pay the total amount overdue,” Matthew Alden, bankruptcy attorney at Luftman, Heck & Associates in Cleveland, Ohio, told The Balance in an email. If the borrower does not respond within 30 days of the first notification, the lender can file a lawsuit in court.

Foreclosure Proceedings

Then, the borrower will receive a second letter informing them that foreclosure proceedings have been initiated, after which the borrower has about 20 to 30 days to reply.

At this point, borrowers usually have two options. “Before there’s a court hearing, the borrower can arrange a settlement with the lender,” Alden said. “Or, during a court hearing, the borrower can submit evidence to…petition the court to rule in their favor, not granting the foreclosure.”

If no agreement is reached through the court process and the court rules in favor of the lender, the home will enter foreclosure and can be sold at a foreclosure sale.

 However, if the sale of the property doesn’t cover the amount owed to the lender, the borrower may be held accountable for a deficiency judgment, depending on the state laws that apply. That means the borrower would still be responsible for paying the remainder of what the lender is owed.

Types of Judicial Foreclosure

Judicial foreclosures are usually initiated by the lender that issued the mortgages to the homeowner. However, other parties may have a right to foreclosure if they have a lien on the property.

In addition to defaulting on the mortgage, a judicial foreclosure may also be used in other situations. “For example, if there are complex issues, like a title dispute, that need to be resolved in order to make the title clear and the property more marketable,” Zebrowski said.

How Long Is the Judicial Foreclosure Process?

The judicial foreclosure process is quite lengthy and can take several months, or even years, says Gennady Litvin, attorney at Moshes Law in Brooklyn, N.Y., told The Balance in an email. 

The longer process has several causes. “Once a foreclosure complaint is filed, the homeowner has many defenses they can assert in order to force the foreclosure lender to prove their allegations,” Litvin said. The homeowner’s response can either speed up or slow down the foreclosure process. 

In addition, the court systems are inundated with foreclosures, he said. “The delay of the court is largely due to a shortage of staff in the judicial system, and in New York, cases have gone on as long as 10 years,” Litvin said.

Right of Redemption  

In many states, the borrower has the right of redemption. 

Right of redemption is a legal process that allows a borrower to reclaim their property after losing it in a foreclosure or other proceedings after it was seized for nonpayment. You can try to reclaim your property by, for example, paying the outstanding mortgage including interest and penalties that accrued. 

A right of redemption can allow a homeowner to purchase back the home even after the foreclosure sale occurred.

Alternatives to a Judicial Foreclosure 

A foreclosure, whether judicial or not, will significantly damage your credit score, and making it much harder to get credit in the future. So, if you’re facing the possibility of foreclosure, consider all of your options with your lender.

Borrowers in financial trouble can request a forbearance or apply to refinance the mortgage. 

“Don't wait until you are late, or very late, on the mortgage payment,” Samman said. “Contact your lender right away when you think there might be an issue making a payment.”

If foreclosure proceedings do begin, you still have options to try to avoid losing your home. For example, with the proper required documentation, the court may help work out a loan modification. 

“The courts are not inclined to have someone lose their home and are willing to work with the borrower,” Samman said. “It is vital that a borrower either hire an attorney to appear at all the settlement conferences ... to resolve this matter without the borrower losing their home.”