An Out of Court foreclosure, or non-judicial foreclosure is when a mortgagee forecloses on a mortgage without filing a lawsuit, or getting a court order. In the District of Columbia, many foreclosures are out-of-court, as mortgages in the District often have clauses allowing the mortgagee pre-authorized right to sell the dwelling.
An Out of Court foreclosure saves the lender time and money to foreclose without having to utilize the courts. In Maryland, for instance, the lender must file an order to docket before a foreclosure can commence, but no hearing needs to be held before the sale of the home can begin.
The debtor can reinstate the loan up to five days before the foreclosure sale by paying the amount, but this can occur no more than once in two years. If the out-of-court foreclosure succeeds, but the house sells for less than the loan, a bank may seek a deficiency judgment, trying to get the mortgagor to pay the difference between the sale amount and what was borrowed.