How To Learn About Trust Deed Foreclosure

Investing in a property involves much paperwork, and it is very important that you are familiar with the terms involved in your land contract before signing the agreement deed. This article will discuss what a Trust Deed Foreclosure is, and how it can be differentiated from Mortgage Foreclosure, which is what it’s usually being mistaken with.

First and foremost, let us define what a foreclosure is. A foreclosure is the lien, or the right of an entity or a lender to take back a property from the borrower if the terms of the loan are not met. The borrower loses all the rights to the property once the foreclosure takes place. The foreclosure process has two types, which is the judicial foreclosure and the non-judicial foreclosure. The procedure for foreclosure is the same for all states, but a judicial foreclosure issues a mortgage, while the non-judicial foreclosure uses trust deeds.

Mortgage Foreclosure involves intervention of the court, wherein the lender takes legal action against the borrower when he or she fails to meet the loan terms on the agreement deed. Because it involves a judicial procedure, mortgage foreclosure might take up to 18 months before it gets fully processed. If the borrower fails to make the necessary steps to update payments after several notices from the lender, the lender will then get a lawyer, who will then file legal documents with the court. If the borrower won’t answer to the complaint, then the judge will favor the lender, issuing a Judgment of Foreclosure and Sale. The property will then be auctioned to the public.

Trust Deed Foreclosure on the other hand takes only about 4 to 12 weeks. It is a non-judicial procedure wherein three parties are involved. The borrower or sometimes referred to as the trustor, the lender or beneficiary, and the trustee, which is a third party representing the lender or beneficiary. The trustee will be the one who will hold the trust title until the loan is fully paid. If the borrower fails to meet the payments, the trustee issues a Notice of Default and a Notice of Home Loss Danger to the borrower. The borrower is given around 90 days to settle the loan and pay any other extra penalties. Once that specific holding period is up and the loan is still unpaid, then the Notice of Trustee Sale will be posted on the property and auctioned to the public. The highest bidder, of course, will be the one to get the property.

Reading about the difference between Mortgage Foreclosure and Trust Deed Foreclosure, it’s obvious why lenders prefer Trust Deed Foreclosure. It saves them time, and they get whatever they lost. It is very important to know these things so that before signing a land contract, you know what you’re getting into.