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Unformatted text preview: is imposed, the lender's position as priority lienholder is jeopardized. If a lender is unaware of a property tax delinquency and, thus, is not protected, the collateral property may be sold for taxes. As a consequence, all realty loan agreements include a clause stipulating a borrower's responsibility to pay property taxes in the amount and on the date required. Otherwise, the lender is notified by the county treasurer, and the loan goes into default and may be accelerated.
Dynasty School (www.dynastySchool.com) 14-39 REAL ESTATE FINANCE FORECLOSURE SALE
When everything fails, the last recourse available to a lender is to pursue legal proceedings to recover the property. This procedure is foreclosure sale and it may be accomplished through either nonjudicial sale or judicial sale. NONJUDICIAL FORECLOSURE PROCESS
When a borrower defaults on the payments, the lender’s right can be enforced through the “power of sale” clause contained in the deed of trust. This is also called the “nonjudicial foreclosure”, or “trustee’s sale”. In trustee’s sale, no court action is required, and the trustee is generally given the power of sale. Trustee’s sale is preferred by lenders as it does not involve a lengthy procedure as in a judicial mortgage’s foreclosure. The trustee’s sale process is outlined below: A lender has the legal right to receive the trust deed payment on time. The lender can start default action after a 10-15 day grace period. The grace period is a set number of days in which a lender will allow a payment to be late without any penalty. The lender, at any time after the grace period, may start default action against the trustor. The default action a lender can start is the trustee’s sale. (A lender has the option of a judicial foreclosure, the same remedy available with a mortgage, but this is rarely used in California.) A trustee’s sale of property hypothecated as a security for a debt is made possible by the provisions of the trust instrument. On default by the trustor, the beneficiary informs the trustee of that fact by a...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10