the trustee or the lender holds your deed of trust, at the time you pay off your loan, a second deed will be issued to grant you full title and ownership to your home.
HOW DOES THIS AFFECT FORECLOSURE?
In these “title theory states,” if you default on your home loan, your lender can instruct the third-party trustee to sell your home. These proceedings follow a non-judicial format, meaning the courts don’t have to be involved.
FORECLOSURE TRUSTEES
Some states, such as California, Oregon, and Georgia, use a deed of trust or a similar document instead of a mortgage. If you have a deed of trust rather than a mortgage, your home probably will go through a non-judicial foreclosure rather than a judicial foreclosure. When this happens, the lender or mortgage servicer will choose a third party to handle the process. This party is known as a foreclosure trustee and is technically neutral. An attorney often will serve as a foreclosure trustee, or the trustee may be a bank or another entity. State laws may restrict who can serve as a trustee. For example, a state may limit trustees to attorneys or require the trustee to have an office or otherwise be physically present in the state. A trustee does not advocate for either side in the foreclosure process but simply administers the proceedings. They have duties of diligence and fairness toward both the borrower and the lender. However, a trustee may have an ongoing affiliation with the lender or mortgage servicer or their attorney. This undercuts their impartiality because they likely want to continue being retained by that party. Despite the problems posed by this situation, most states have not addressed the potential conflict of interest. North Carolina is an important exception of which to be aware if you are a homeowner there.
38
Powered by FlippingBook