Those states that allow nonjudicial foreclosure have granted the lender the power to foreclose on a property without court approval. The procedure is clearly established, and it becomes a step-by-step technical process to foreclose on the property.

A nonjudicial foreclosure is usually supervised and conducted by the lender's attorney. Just as in a judicial foreclosure, there is little defense for the borrower who has not made the required payments.

Deeds of Trust

States that have authorized the nonjudicial foreclosure use a deed of trust. It is a legal document used in lieu of a traditional mortgage. With a deed of trust, the title to the property passes from the property seller to a trustee who holds the mortgaged property until the mortgage has been fully paid by the borrower. The trustee is automatically authorized to sell the property should the borrower default on the loan. The trustee then pays the lender the outstanding amount of the loan.

The authorization to institute a nonjudicial foreclosure is typically included in the deed of trust or loan note. The borrower authorizes this type of foreclosure as part of the terms and conditions of the home loan.

The Notice of Default

The nonjudicial foreclosure often commences with the filing of a notice of default. This occurs once the borrower has defaulted on the loan and the lender intends to proceed with a foreclosure. If the borrower does not bring the loan current, a notice of sale is mailed to the homeowner. A notice is usually also posted in public places, recorded at the county courthouse, and published in the local legal publications.

Following the required period, a public auction or sale is held. The highest bidder becomes the owner of the property.