A non-judicial foreclosure is when lenders foreclose property without getting a court order first. In a jurisdiction that passes a statute authorizing non-judicial foreclosure, private parties must contract for a power-of-sale clause in a mortgage or deed of trust to allow non-judicial foreclosure.
If a borrower defaults, the trustee or mortgagee may exercise their power of sale to foreclose on the property without any court action or authorization. Creditors save time and money with a non-judicial foreclosure because they do not need to file an action for foreclosure with the courts.
Where available, non-judicial foreclosures are heavily regulated, and parties must follow statutory procedures. Generally, before foreclosing, lenders must give special notice to the property-owner. Afterwards, lenders must wait a specified time before auctioning off the property. In disputes, courts apply their jurisdiction’s contract law to interpret power-of-sale clauses.
[Last updated in August of 2023 by the Wex Definitions Team]