Judicial Foreclosure

DEFINITION of 'Judicial Foreclosure'

Foreclosure proceedings in which a mortgage lacks the power of sale clause. In such an instance, many states require the foreclosure to be processed through the state's courts. If the court confirms that the debt is in default, an auction is held for the sale of the property in order to acquire funds to repay the lender.

This differs from non-judicial foreclosures, which are processed without court intervention.

BREAKING DOWN 'Judicial Foreclosure'

Many states require judicial foreclosure to protect equity the debtor may have in the property. Judicial foreclosure also serves to prevent "strategic disclosures" by unscrupulous lenders.

In instances where the sale of the property through the auction does not generate enough funds to repay the mortgage lender, the former homeowner will still be held liable for the remaining balance.