Welcome to www.discoverforeclosures.com - a Request Company
Request is the leader in Consulting and Educational Services for foreclosure property procurement in California.


Contact Us   |  Free Newsletter   |   Read my blog, subscribe, and fill your head with the thoughts from my head!   New Schedule Posted, click here to learn more!

 

Company  |  Services  |  Resources  |  Workshops       

         
  Resources
 
Quick Find:

 


Workshops



Articles of Interest

Article Archive



Tips & FAQ's

Test Your Knowledge

 


Why Do We Have a “Substitute of Trustee”?

There are all kinds of documents out there when you are researching title and debt on a foreclosure property that demand recognition and explanation.  Some of those documents boggle the mind in complexity but most just take a little thought.  One of these is the “Substitution of Trustee” --a ubiquitous document that keeps showing up all the time!  I would guess that substitution makes up something just under ten percent of the documents that we keep running into when grinding through the rigors of title and debt changes as we research the obligatory fifteen to twenty foreclosure properties before purchase.

So what happens when we bump into a Substitution of Trustee?  Let’s start with a little story.  Here I am a person buying a property, and I am unable to pay all cash when I purchase the property (no surprise there).The lender requires me to read, understand, and sign a promissory note which obligates me to pay the lender back the interest plus principal over the life of the loan. I know that that is just the way that lenders get paid for their services, so I have no problem with that.

Things get a little stickier when he also requires me to read, understand, and sign a deed of trust.  This seems a little strange until the lender points out that the trust deed is a mechanism through which the lender can take action against me if I should not meet the obligations of the promissory note I just signed.  I’ve heard of that--the lender will foreclose!

In the deed of trust three entities (persons) are identified: the lender (beneficiary), the borrower (trustor), and the trustee .  This latter person (the trustee) is given “bare legal title to my property” (actually owns the property!) and has the right to sell the collateral (the property against which the deed of trust applies) if the obligations to the lender on the promissory note are not met.  This is the ONLY right of the trustee who may not act without the explicit direction of the foreclosing lender identified in the deed of trust. 

Should I stumble as the borrower (trustor) and not make timely payments to the lender, the lender will give a declaration of default to the trustee who will then put me into pre-foreclosure (the period between the Notice of Default and the final trustee’s sale).  In the eyes of the borrower, the trustee is a towering figure whose action embodies the worst of all my fears.  I don’t want to hear about or from the trustee!

In all probability the name of the actual trustee will hardly be remembered by the trustor throughout the ensuing years as payment after payment is regularly made by the trustor.  It is only when the unforeseen occurs (payments are not made as promised) that the genie (trustee) in the bottle escapes and begins the foreclosure dance that things take a decidedly bad turn for the borrower.  It is at this point that the anticipated process may change.

The trustee identified in the original, signed deed of trust probably is not the same trustee with whom the lender functions in more recent years as new deeds of trust are offered to eager borrowers.  However, the trustee named in the original deed of trust has been given the power to foreclose non-judicially under California Civil Code 2924.  Not a problem!  The lender records a Substitution of Trustee transporting the powers and authority of the original trustee in the original deed of trust to the newly assigned trustee.  Upon completion of the recording, the newly entitled trustee performs the responsibilities and obligations of the original trustee.  Problem identified.  Problem addressed. Problem solved!  Works like a charm!

I would be remiss if I didn’t add a small comment at this point. Not all authorities share my happy attitude presented above.  Some question who legally has been given the authority to foreclose, and “Where are the documents that transfer that authority?”.  If such questions really intrigue you, I suggest that you contact a real estate attorney with a much better grasp of those current problems.

 


Find Foreclosure Workshops in your area! Click here for workshop dates and locations!
Read More About
Our Courses
>>

Customer Testimonials

"The information in Warren's seminar is not hype. It is useful information necessary for anyone getting into the foreclosure business. I have bought over a dozen houses through foreclosure sales, including the one I live in." (- Victor Fong, Palo Alto, CA)

"Warren gave me a sound education...I've done quite well with my twenty properties to date." (- Michael A. Nelson, Sunnyvale, CA)
Read more testimonials >>

Free Quarterly Newsletter

Knowledge is key! Receive great tips & tricks, fantastic articles, information on coming Seminars & Workshops, special promotions and more—delivered right to your in-box!

Subscribe Now! >>

           
   

 


Send this page to a friend
Printer friendly version of this page Send this page to a friend