Frequently Asked Questions
Must the original trustee process a non-judicial foreclosure?
No. The beneficiary may substitute trustees anytime.
Do I need the borrower's permission to foreclose?
No. You already have their permission; they gave it when they signed the note and deed of trust.
What documents do I need to foreclose?
You will need to provide the trustee with the note and deed of trust, any modification or extension agreements, additional notes and any assignments. If an original document is lost, it may be necessary to provide a lost instrument bond. Consult with your trustee. You also need to provide the trustee with certain essential information, such as the unpaid balance of the note, the date to which the interest is paid, the reason for the default (such as failure to make the payment which became due on a certain date), information regarding any advances you have made, the last known residence or business address of the last known owner, and the property address. If you are not using the original trustee, a substitution of trustee must be signed and notarized by the beneficiary.
Why is an accurate "last known address" of the last known owner vital?
Failure to send notice to an accurate business or residence address of the last known owners may invalidate the foreclosure. Search all your records completely and carefully. If the borrower has more than one loan with your firm, review all sets of records. If the borrowers are married and you receive word from one of them that he or she is no longer residing at the property address and you are provided with a new address, be sure to communicate that information to the trustee as soon as possible.
Who pays the foreclosure fee and costs?
If the borrower brings the loan current or pays it off, the borrower is responsible to the lender for the foreclosure fee and costs. Since the lender is obligated to pay the trustee, the lender should be sure to not overlook these foreclosure expenses. If the property is sold to an outside bidder at the foreclosure auction, the foreclosure expenses will be paid by the bidder. Only when the lender is the successful bidder at the sale will the lender not be able to look to someone else to recover the trustee's fee and costs. Hopefully, when the property is resold, the lender can expect to recover their foreclosure expenses.
As a junior deed of trust holder should I be concerned with a foreclosure
being held by the senior deed of trust?
YES! As a junior lien holder your interest in the property could be terminated by the senior lien holders trustee's sale. You may either reinstate the loan prior to the senior's trustee's sale, which could require less of a cash outlay than bidding at the senior's foreclosure sale. If their foreclosure is several months ahead of your foreclosure, then it may save time and be beneficial to bid at the trustee's sale to protect your interest. If you do decide to bid at the sale you must have certified funds at the sale sufficient to include the debt of the senior deed of trust plus the amount of your debt.
What happens when the borrower files a bankruptcy?
When the borrower files a bankruptcy an "automatic stay" prohibits the Trustee to continue with the foreclosure. It is very important to retain legal counsel to protect your interest and obtain "Relief from Stay" in order to proceed.
What is a Trustee's Sale Guarantee report?
The Trustee's Sale Guarantee (TSG) report provides the foreclosing trustee with the information necessary to process your foreclosure and guarantees the correctness of that information. It sets forth the record owners and lists all exceptions of record against the secured property. It provides the names of those who are to receive notices and the name of the newspaper in which the trustee must publish. The TSG is provided by a title company in the county where the property is located. When you receive your copy from the trustee, you should be alert to certain items:
Delinquent real estate taxes.
Notice of default recorded by a senior deed of trust. You should contact
the senior beneficiary to determine if their loan is still delinquent.
Federal (IRS) tax liens recorded.
Lis Pendens. This provides constructive notice of pending litigation,
the outcome of which will not be affected by the foreclosure.
Notice of substandard dwelling.
Any irregularities noted therein.