that we need to discuss.
In “title theory states,” where deeds of trust are used, the homeowner doesn’t really have the title to the property. Instead, the title is held by an impartial trustee as security for your loan. You might be given the title when you buy the property, but you then hand it over to the third-party trustee. In a few “title theory states,” the lender holds the deed instead of a third-party trustee. In these states, you might still have an actual mortgage, rather than a deed of trust. Obviously, this can be confusing, but if you’re in doubt about your status, your attorney or real estate professional should review your loan documentation and clarify the situation. Regardless of whether 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. If you default on your loan, the lenders in most of these states follow a similar process. First, they will send you a Notice of Default and notify you that your home will be sold at auction. The trustee will then proceed to sell the property to the highest bidder. This process favors lenders because it enables them to sell the property while bypassing the time and hassle of going through the courts. In “mortgage states,” the lender must follow a judicial process by successfully suing you before foreclosing. This provides you the opportunity to be heard in court and possibly postpone the
37
Powered by FlippingBook