Also known as:extrajudicial foreclosures · non-judicial foreclosure · nonjudicial foreclosure
Written by attorneys · grounded in primary & secondary sources — see below
A foreclosure process conducted without court involvement under the mortgage or deed of trust and applicable state statute. The mortgage or statute dictates the required procedure and determines the notice, sale, and redemption rights available to the parties.
Sources & Authorities
How it applies
Common Examples
2
Missed Escrow Deposit Triggers Sale
Ezra Eastman granted a mortgage on his commercial building to Enigma Technologies that required monthly escrow deposits for property taxes. An internal accounting error caused one deposit to be missed for ten days. Enigma Technologies posted notice of an extrajudicial foreclosure sale at the courthouse without first providing written notice or a cure period as the mortgage required. The court enjoined the sale because the contractual conditions precedent had not been satisfied.
Covenant Breach Without Board Approval
Emma Erickson mortgaged her theater to Elite Dynamics under an agreement containing an occupancy covenant. When Erickson temporarily suspended programming for renovations, Elite Dynamics directed its loan committee to commence extrajudicial foreclosure without obtaining full board ratification or issuing a formal cure notice. Erickson sued to enjoin the proceeding. The court held that the lender could not commence the sale because statutory and contractual prerequisites remained unsatisfied.
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Uniform Acts
Model Codes
Common Law
Restatements
Casebooks
Common questions
Frequently Asked
4
What must occur before a creditor may commence extrajudicial foreclosure?+
A creditor may commence extrajudicial foreclosure only after a default in the obligation and satisfaction of all conditions required by the mortgage agreement and by law. Both elements are required.
Supporting sources
Does a temporary accounting error that is later cured prevent extrajudicial foreclosure?+
A temporary default satisfies the first requirement even if later cured, but the lender must still satisfy all contractual conditions such as notice and cure periods before commencing the sale.
Supporting sources
May a lender proceed with extrajudicial foreclosure when the mortgage requires board ratification or formal cure notice?+
No. Failure to obtain required internal approvals or to issue a formal cure notice leaves the contractual conditions unsatisfied, so the lender may not commence the foreclosure.
Supporting sources
Does a non-monetary covenant breach alone authorize extrajudicial foreclosure?+
A covenant breach may constitute a default, but the lender must still satisfy every additional condition imposed by the mortgage and by law before commencing the sale.
Supporting sources
941 N.E.2d 40 (Mass. 2011)Property
…goes forward unless the mortgagor obtains a court order enjoining the foreclosure. Because the statutory scheme allows extrajudicial foreclosure, we adhere to the familiar rule that one who sells under a power of sale must follow strictly its terms; otherwise the sale is void. One of the terms that must be strictly adhered to is the…
Real PropertyMortgages/security devices · ForeclosureUBEIntermediate