Advantages

Why is judicial foreclosure more advantageous to your association? In a declining or flat real estate market, the threat of foreclosure is less significant – many properties are ‘upside down’ with no equity, so members have less reason to pay.

In the current economy and real estate market, the association often should not take over ownership, but with non-judicial foreclosure that is the only option. If the association decides not to take the property, the money spent pursuing non-judicial foreclosure is not well-spent.

Judicial foreclosure gives the association the additional option of pursuing money damages. If the property has no equity, a money judgment is still something the member must reckon with, and gives the member another reason to pay.

A money judgment is normally followed by recording an ‘Abstract of Judgment’ in the debtor’s county of residence. The judgment is valid for ten years and is renewable. The member who is unable to pay today may be able to pay as their circumstances improve.

The unsophisticated member may not understand non-judicial foreclosure, but will know a lawsuit is a serious matter, and so is more likely to respond.

The sophisticated member who is making the conscious choice to ‘play out the string,’ because there is no equity to save, will be more concerned about the additional risk of a money judgment.

With judicial foreclosure, the member receives a claim not from a debt collection company, but from the HOA’s attorney – once again, making it more likely the member will recognize this as a serious matter.

Judicial foreclosures are not required by law to start completely over if a technical flaw is found in the notices, while non-judicial foreclosures must start completely over. A technical error with the lien has no bearing on the lawsuit for damages (Civil Code Section 5700)(b). In the meantime, any error in the lien is corrected and moves forward from that point, while the lawsuit claim for money damages continues to proceed.

An uncontested judicial foreclosure is just as fast as a non-judicial. The owner is in default 30 days after the suit is filed and served, and default judgment papers are filed with the court.

Should a lending institution foreclose on the property, wiping out an association’s lien, the association still has a money damages claim in progress.

Non-judicial foreclosure is often regarded as unfair, because the homeowner has no ability to contest the matter, and because of the ability to take away someone’s home without a court supervising the matter.