The difference between judicial and non-judicial states …
is relatively simple, but an important and often misunderstood part of the foreclosure process. We’re encountering a lot of confusion among agents and homeowners about this issue, so here’s some clarification.
A “judicial” state requires a judicial review of the foreclosure case before it can be officially processed. The foreclosure process actually begins by filing a Lis Pendens (“a lawsuit pending”) document in a court of law. Following are the states that require judicial review: Connecticut, Delaware, Florida, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Pennsylvania, South Carolina, Vermont.
In “non-judicial” states, lenders or trustees file a Notice of Default with the county recorder’s office to commence the foreclosure process, and the process does not need to go through the courts. These states include Michigan, New Hampshire, Tennessee, Utah, Washington D.C., West Virginia.
The remaining 25 states allow both judicial and non-judicial foreclosure, though some have tendencies toward one practice or the other.
For some additional clarification, Thomas Lawler, former director and senior vice president at Fannie Mae, recently provided this informative explanation in a post for The New York Times:
“Some states allow both judicial and non-judicial foreclosures. … And in some states, judges have enormous discretion as to how to handle a foreclosure. … In many judicial states, foreclosures can be challenged, and such challenges have increased drastically.”
This distinction has become increasingly visible due to the recent “foreclosure freezes” by major lenders nationwide, most of which initially halted foreclosure proceedings in the states requiring judicial review. As a real estate agent, make sure you understand the foreclosure process and timelines in your state, so you can properly educate your distressed clients. Never before has the counsel of educated real estate agents been in greater need. This is another opportunity to demonstrate your value and industry insight.