- A deed of trust serves the same purpose as a mortgage, but it involves three parties: you, the bank, and a trustee that holds the title until you’ve paid off the loan. This trustee is typically a title company, but in some places it can also be an attorney.
You probably don’t remember choosing one over the other—because you didn’t. Your state’s law determined which instrument would be used. And in fact, for the average homeowner, there’s virtually no difference between the two. However, these instruments affect the kind of foreclosure you will likely face:
- Judicial foreclosure. Typical in mortgage states, it requires the lender to go to court to proceed with foreclosure.
- Non-judicial foreclosure. Typical in deed of trust states, the trustee can usually proceed with foreclosure without involving the courts.
Many states allow both judicial and non-judicial foreclosures, depending on specific terms in the loan documents. Non-judicial foreclosures are usually—but by no means always—quicker than judicial foreclosures.
Learn your state’s quirks
Each state has its own specific ways of handling foreclosures—you can’t even assume that all judicial or non-judicial states will be the same.
If you live in Georgia, for example, you will probably go through a non-judicial foreclosure. The lender will attempt to notify you that foreclosure is imminent, and then place a “notice of foreclosure” in the local legal newspaper for four consecutive weeks. After that, the lender’s attorney can sell your home to the highest cash bidder. Lenders on Georgia homes can often complete the repossession process in as little as six weeks.
On the other hand, if you live in Connecticut, you will definitely proceed through a judicial foreclosure. The judge presiding over the case has the option to grant either a “strict foreclosure,” where the deed is forfeited immediately, or a “foreclosure by sale.” Your lender must send you a letter at least 60 days before the foreclosure action, after which time the foreclosure can begin, typically taking up to four months.
Compare that state to New York: It’s also a judicial-only state—but the process typically takes more than a year.
Review the loopholes
Although nothing replaces professional help, researching your state’s rules is a good place to start. Even beyond the usual regulations, some states have recently created special rules to ease borrowers through the foreclosure process. Qualified local help can help you with such programs as:
- Maine’s borrower-friendly foreclosure diversion program. It creates stays of proceedings and requires lenders to participate in good-faith foreclosure discussions. Lenders who don’t participate can find their lawsuits dismissed.
- New York’s new rules that add loans secured by borrowers’ homes in its mandatory settlement conference law, essentially requiring lenders to meet with borrowers to discuss settlement.
The more you understand your state’s laws, the more likely you will be able to move through your foreclosure process with a minimum of bumps—or even avoid it altogether.
Read more: http://www.houselogic.com/articles/foreclosure-process-how-state-laws-vary/#ixzz10tI1FC5w