A nonjudicial foreclosure is when lenders foreclose property without getting a court order first. In a jurisdiction that passes a statute authorizing nonjudicial foreclosure, private parties must contract for a power-of-sale clause in a mortgage or deed of trust to allow nonjudicial 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 nonjudicial foreclosure because they do not need to file an action for foreclosure with the courts.
Where available, nonjudicial 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.
See State Property Statutes; Judicial Foreclosure
[Last updated in August of 2023 by the Wex Definitions Team]