What Is The Criteria For A Bank To Do A Judicial Foreclosure?
Q: I was wondering about judicial foreclosures in California. I read somewhere that if a bank is going to foreclose on a house, they almost always do a non-judicial foreclosure. Why is this the case? What is the criteria for a bank to do a judicial foreclosure? If a house has a mortgage that is significantly higher than the value of the house, is the pursuit of deficiency payments the main trigger to get a bank to go through a judicial foreclosure? I read somewhere that a judicial foreclosure is ineligible if the property in question is being used as the residence for the debtor... is this true? I'm asking these questions because I'm thinking of buying a house in the Bay Area, but one of the risks I'm considering is that I may be buying right at the top of the real estate bubble just as interest rates have risen. The "perfect storm" would be if I lose my job as well, since unemployment is so vast here, and couldn't afford to pay the mortgage payments. I'm just trying do some due diligence and completely understand what my options and what my rights are in the "worst-case scenario". I appreciate any help anyone can offer.
A: > I was wondering about judicial foreclosures in California. > I read somewhere that if a bank is going to foreclose on a > house, they almost always do a non-judicial foreclosure. Why is > this the case? What is the criteria for a bank to do a judicial > foreclosure? The primary difference between judicial and non-judicial foreclosure is that if the property is sold for less than the amount left on the loan, the creditor can get a judgment for the difference with a judicial foreclosure, but not a non-judicial. If the loan was used to buy property used as the debtor's residence, no deficiency judgment would be allowed in any case. So it is unlikely that a lender would go through the time and cost of a judicial foreclosure. > If a house has a mortgage that is significantly higher than the > value of the house, is the pursuit of deficiency payments the > main trigger to get a bank to go through a judicial foreclosure? It's a dollars and cents decision, certainly. But a judicial foreclosure could take a year or two. In the mean time the lender has no income from the property or the loan, and is paying out thousands of dollars in attorney fees. On the other hand, a non-judicial foreclosure can be completed in less than four months, with a minimal cost (limited by statute) for the foreclosure company. Lenders would rather get what they can now, than put out even more money and not get anything for a year or two. > I read somewhere that a judicial foreclosure is ineligible if > the property in question is being used as the residence for the > debtor... is this true? If it was the original loan, yes. If it was a refinanced loan, no. > I'm asking these questions because I'm thinking of buying