In California, a lender can foreclose on deeds of trust or mortgages using a nonjudicial foreclosure process. Nonjudicial foreclosures take place outside of court. Whereas, a judicial foreclosure process takes place through the court. In California, the nonjudicial foreclosure process is the more common of the two types.
Nonjudicial foreclosures is used when there is a power-of-sale clause in the deed of trust that secures the mortgage loan by giving the trustee the authority to sell the home to pay off the loan balance at the request of the lender if the borrower defaults, or fails to make payments. When a lender uses the nonjudicial foreclosure process against a borrower who fails to pay on a mortgage for his or her primary residence, the lender gives up the right to collect a deficiency judgment against the borrower. A deficiency judgment is an unsecured money judgment against a borrower whose foreclosure sale did not produce sufficient funds to pay the underlying promissory note, or loan, in full. Most lenders prefer the nonjudicial foreclosure process because it is much faster and less costly in comparison to a judicial foreclosure.
Judicial foreclosure involves filing a lawsuit to get a court order to sell the home, or foreclose. It is used when there is no power-of-sale clause in the mortgage or deed of trust. Generally, after the court orders the sale of your home, it will be auctioned off to the highest bidder. Judicial foreclosures are rare in California. A judicial foreclosure allows the lender to get a deficiency judgment against the borrower. After the judicial foreclosure is complete, the homeowner has the right of redemption, which allows him or her to buy the home back from the successful bidder at the auction for one year after the sale. The judicial foreclosure process is longer and more costly than a nonjudicial foreclosure.