30 Sep What is the Difference between Judicial and Non-Judicial Foreclosure?
Mortgage foreclosure is primarily governed by the laws of the state where the property exists. State laws vary. In some states–Florida for example–the law requires that mortgage lenders seek a court judgment permitting the foreclosure. This requirement is helpful for consumers because it provides a ready-made venue to assert defenses to the foreclosure–such as Truth in Lending or predatory lending violations–and therefore to convince a court to disallow it. However, some states, such as Massachusetts, are so-called non-judicial foreclosure states. In these states, a lender can foreclose a mortgage simply by the power contained in the mortgage. This is called different things, but in Massachusetts, for example, it is called the right of entry and the power of sale. The consequence is that there is no easy venue for consumers to assert defenses to the foreclosure outside of bankruptcy. However, the mortgage lender must still comply with state advertising and notice requirements to have a valid sale. Moreover, there are some federal protections to foreclosure that apply in every state for active-duty and certain reserve members of the military. In Massachusetts, lenders bring an action for a declaration that a homeowner is not in the military before proceeding with foreclosure, but a homeowner is not allowed to use these proceedings to assert other defenses to the foreclosure.
Nicholas Ortiz, Boston Bankruptcy Attorney
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