When a homeowner cannot move out of preforeclosure, be it through selling or otherwise, the bank will move forward with the foreclosure process. At this point, investors still have a chance to purchase the property at a reasonable price point, but there are other things they need to know.
Here's what investors need to know about trustee deeds and substitute trustees.
In the state of Texas, the majority of foreclosures are non-judicial foreclosures. With this process, courtroom litigation is not required. The borrower will have agreed ahead of time to give the lienholder (the mortgage company) the right to accelerate the lien and foreclosure on the property.
One of the requirements for non-judicial deeds is a trustee's deed, also called a foreclosure or substitute trustee deed. This type of deed conveys a foreclosed property at a trustee sale.
A trustee deed will identify three parties: the grantor (also known as the trustee), the beneficiary (the lender and grantor), and the grantee (the buyer.)
The trustee is appointed by the lender and holds the property deed as collateral for mortgage loan repayment. If a borrower fails to fulfill their payment obligations, the lender can instruct the trustee to carry out the terms of the deed or move into preforeclosure.
As part of the trustee's responsibilities, they will post the notice of acceleration and the trustee's sale and provide a copy to the borrower. They will also conduct the foreclosure sale on the provided sale date and deliver the deed to the highest bidder.
A substitute trustee is a person designated by the lender under the terms of the security instrument (deed of trust) to exercise the power of sale (Tex. Prop. Code § 51.0001(7)). The mortgage lender can appoint a substitute trustee should the original trustee be unable to perform the property sale at the public auction.
Appointing a substitute trustee
A substitute trustee can be appointed by the lender, provided that it is explicitly expressed in the deed of trust. The appointment can occur at any point of the foreclosure process once the notice of appointment is recorded in public records.
Many times, the trustee or substitute trustee is the lender's attorney. On the deed of trust, the individual must identify whether they are serving as an appointed trustee or substitute trustee.
Disclaimer: Pointer Data is not bar-certified in the state of Texas and cannot provide official legal advice. For legal advice concerning real estate foreclosures, contact a bar-certified attorney.