Also known as: non-judicial foreclosure · nonjudicial foreclosures · power of sale foreclosure
Written by attorneys · grounded in primary & secondary sources — see below
A foreclosure method conducted without court supervision under a power-of-sale clause in the mortgage or deed of trust and applicable state statute. The mortgage or statute controls notice, sale procedures, and redemption rights. A creditor may commence the process only after default and satisfaction of all contractual and legal conditions.
Norman Nash stops paying the mortgage held by Nexus Technologies on his commercial building. The deed of trust contains a power-of-sale clause. Nexus directs the trustee to post statutory notices and conduct a public auction without filing any court action. The trustee sells the property to the highest bidder and applies the proceeds to the debt.
Nadia Novak falls behind on payments to Neptune Energy. The mortgage requires written notice of default and a thirty-day cure period before foreclosure. Neptune sends the required notice, waits the cure period, confirms default, and then authorizes the trustee to begin nonjudicial foreclosure. The trustee posts the statutory notice disclosing the creditor and commences the sale process.
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A creditor may commence nonjudicial foreclosure only after the borrower defaults on the obligation and the creditor satisfies every condition required by the mortgage agreement and by law. These conditions commonly include written notice of default and an opportunity to cure. Failure to meet any precondition prevents the creditor from starting the process.
Supporting sources
A foreclosure sale price does not render the sale defective unless the price is grossly inadequate and the proceeding was not regularly conducted. When statutory notice and advertising requirements are strictly followed, courts uphold the sale even if the price falls below recent comparable sales. Gross inadequacy is a high threshold that protects the finality of regularly conducted sales.
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The notice of nonjudicial foreclosure must disclose the name of the creditor and, if applicable, the person authorized by the creditor to foreclose. Additional disclosures may be required by the mortgage or state statute. Proper disclosure ensures borrowers receive accurate information about who is enforcing the security interest.
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