As mentioned, nonjudicial foreclosures are faster and cost less (no lawyers involved), so it is obviously a preferred method for lenders. In those states where both judicial and nonjudicial foreclosures are permitted, the nonjudicial foreclosure is usually used by the lender. Once the lender has determined the borrower is in deep financial trouble, the sooner the loan can be foreclosed, the sooner the lender can repossess the property and sell it, and the better it is for the lender.

Although the amount of time it takes to complete a nonjudicial foreclosure varies from state to state, some states require more time than others. This is because specific procedures or rules must be followed. Often the time delay is based on notification requirements. The amount of time it takes to foreclose in nonjudicial states often is determined by how much time is required to advertise the property before it is sold at a public sale. For an approximate timetable of average nonjudicial foreclosure times, see Appendix A.

Th following form depicts a typical notice of default and foreclosure sale used by HUD in those cases where a deed of trust secured the property. The form shows the type of notice that is recorded at the county courthouse. A copy of the form is delivered or served on the defaulting borrower. Notice that it also includes the date of the public sale.

NOTICE OF DEFAULT AND FORECLOSURE SALE WHEREAS, on _______________, a certain Deed of Trust was executed by __________________ as mortgagor in favor of __________ __________ as mortgagee, and was recorded on ______________, in Book _______, Page ____ in the Office of the ____________________, ____________________ County, ________________; and

WHEREAS, the Deed of Trust was insured by the United States Secretary of Housing and Urban Development (the Secretary) pursuant to the National Housing Act for the purpose of providing single family housing; and

WHEREAS, the beneficial interest in the Deed of Trust is now owned by the Secretary, pursuant to an assignment dated _______________, and recorded on __________, in Book ____________, Page ______________, in the office of the ____________________, ____________________ County, ____________________; and

WHEREAS, a default has been made in the covenants and conditions of the Deed of Trust in that the payment due on __________, was not made and remains wholly unpaid as of the date of this notice, and no payment has been made sufficient to restore the loan to currency; and

WHEREAS, the entire amount delinquent as of __________ is $_____________; and

WHEREAS, by virtue of this default, the Secretary has declared the entire amount of the indebtedness secured by the Deed of Trust to be immediately due and payable;

NOW THEREFORE, pursuant to powers vested in me by the Single Family Mortgage Foreclosure Act of 1994, 12 U.S.C. 3751 et seq., by 24 CFR part 27, subpart B, and by the Secretary's designation of me as Foreclosure Commissioner, recorded on ________ in Book ________, Page _______ notice is hereby given that on __________ _______ at __________ local time, all real and personal property at or used in connection with the following described premises (“Property”) will be sold at public auction to the highest bidder:

Commonly known as:

The sale will be held at ____________________.

The Secretary of Housing and Urban Development will bid $_____________.

There will be no proration of taxes, rents, or other income or liabilities, except that the purchaser will pay, at or before closing, his prorata share of any real estate taxes that have been paid by the Secretary to the date of the foreclosure sale.

When making their bids, all bidders except the Secretary must submit a deposit totaling $__________ [10 percent of the Secretary's bid] in the form of a certified check or cashier's check made out to the Secretary of HUD. A deposit need not accompany each oral bid. If the successful bid is oral, a deposit of $_______________ must be presented before the bidding is closed. The deposit is nonrefundable. The remainder of the purchase price must be delivered within 30 days of the sale or at such other time as the Secretary may determine for good cause shown, time being of the essence. This amount, like the bid deposits, must be delivered in the form of a certified or cashier's check. If the Secretary is the highest bidder, he need not pay the bid amount in cash. The successful bidder will pay all conveying fees, all real estate and other taxes that are due on or after the delivery date of the remainder of the payment, and all other costs associated with the transfer of title. At the conclusion of the sale, the deposits of the unsuccessful bidders will be returned to them.

The Secretary may grant an extension of time within which to deliver the remainder of the payment. All extensions will be for 15 day increments for a fee of $500.00, paid in advance. The extension fee shall be in the form of a certified or cashiers check made payable to the Secretary of HUD. If the high bidder closes the sale prior to the expiration of any extension period, the unused portion of the extension fee shall be applied toward the amount due.

If the high bidder is unable to close the sale within the required period, or within any extensions of time granted by the Secretary, the high bidder may be required to forfeit the cash deposit or, at the election of the foreclosure commissioner after consultation with the HUD representative, will be liable to HUD for any costs incurred as a result of such failure. The Commissioner may, at the direction of the HUD representative, offer the property to the second-highest bidder for an amount equal to the highest price offered by that bidder.

There is no right of redemption, or right of possession based upon a right of redemption, in the mortgagor or others subsequent to a foreclosure completed pursuant to the Act. Therefore, the Foreclosure Commissioner will issue a Deed to the purchaser(s) upon receipt of the entire purchase price in accordance with the terms of the sale as provided herein. HUD does not guarantee that the property will be vacant.

The scheduled foreclosure sale shall be canceled or adjourned if it is established, by documented written application of the mortgagor to the Foreclosure Commissioner not less than 3 days before the date of sale, or otherwise, that the default or defaults upon which the foreclosure is based did not exist at the time of service of this notice of default and foreclosure sale, or all amounts due under the mortgage agreement are tendered to the Foreclosure Commissioner, in the form of a certified or cashier's check payable to the Secretary of HUD, before public auction of the property is completed.

The amount that must be paid if the mortgage is to be reinstated prior to the scheduled sale is $_______________ as of __________, plus all other amounts that would be due under the mortgage agreement if payments under the mortgage had not been accelerated, advertising costs and postage expenses incurred in giving notice, mileage by the most reasonable road distance for posting notices and for the Foreclosure Commissioner's attendance at the sale, reasonable and customary costs incurred for title and lien record searches, the necessary out-of-pocket costs incurred by the Foreclosure Commissioner for recording documents, a commission for the Foreclosure Commissioner, and all other costs incurred in connection with the foreclosure prior to reinstatement.

Tender of payment by certified or cashier's check or application for cancellation of the foreclosure sale shall be submitted to the address of the Foreclosure Commissioner provided below.

Date:______________

____________________

Foreclosure Commissioner

Setting the Sale

Pushing for the sale of the property becomes the priority of the lender when the borrower defaults and does not appear likely to be able to make the past-due monthly loan payments. The nonjudicial foreclosure allows the lender to force the sale to recover the money that was loaned.

Because the trustee's sale date is set at the time of the notice of default (or shortly thereafter), the scheduled sale can occur much faster than with a judicial foreclosure. It is always scheduled as soon as legally allowed.

When the Sale Occurs

The foreclosure sale is public. There is often a minimum bid required, which is the amount of the overdue loan plus costs. The successful bidder must usually pay by cash or certified check at the time of the sale or within a few hours after the sale. Although personal checks are not accepted, attorney's checks are accepted.

In fact, you will be amazed at how fast a sale of the property can occur. Someone's home can literally be sold and transferred within minutes. It is both a swift and efficient method for the lender. The sale can be accomplished quickly and smoothly with a nonjudicial foreclosure. If there is not an acceptable bid at the public auction, the property is taken back by the lender.

Redemption by the Borrower

In some states, after a nonjudicial foreclosure sale takes place the borrower can still keep her property. This is called the right of redemption. If the borrower can pay all the past-due payments, plus all the additional fees, she may keep her property. The amount of days that redemption can occur is called the redemption period. Should the borrower exercise her right of redemption, whoever bought the property at the public auctions is given his money back. After the borrower's redemption period has expired, a trustee's deed is drafted and presented to the successful highest bidder of the public sale.