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Finance instruments
Before a lender will finance the purchase of a new house, the borrower must promise to repay the funds. That promise is put in writing in the form of promissory note. A promissory note is a written promise to pay money. The one promising to pay the money is call the maker of the note. Usually the maker is the homebuyer. The one promised payment is called the payee. Usually payee is either a lender or seller.
Promissory notes include: 1. The name of the parties, 2. The amount of the debt, 3. How and when money is to be paid, 4. Whether there is acceleration clause, 5. The payee's remedies if the money is not properly repaid, 6. Signature of the maker.
Power of sale. The deed of trust contains a power of sale clause which authorizes the trustee to sell the property without the court supervision if the debtor defaults. A typical power of sale clause might read as follows: If the default is not cured on or before the date specified in the notice, a lender, at its option, may require immediate payment in full of all sums secured by this security instrument without further demand and may invoked the power of sale. If lender invokes the power of sale, lender shall execute or cause trustee to execute a written notice of the occurrence of an event of default and off lender's election to cause the property to be sold.
Trustee's sale. In connection with the beneficiary, the trustee conducts an out-of-court sale, of auction, called a trustee's sale. The proceeds from the sale are used to pay off trustor?s debt.
However, before the trust he can sell the property, certain legal requirements must be met. First, the beneficiary, lender, prepares a document called a declaration of default, requesting the trustee to begin in the foreclosure proceedings. Trustee than prepares a notice of default and election to sell, which is sent to the borrower. The trustee also notifies anyone who has subsequently recorded a request for notice of default and sale. The trustee is required to provide notice to all lien holders. The borrower can prevent the sale of the property by reinstating the loan. A loan is reinstated by paying all past due installments, plus late charges, interest, and other costs. A borrower may reinstate a loan at any time from the notice of default until five business days before the sale date.
In the loan is not reinstated to stay within three months of the notice of default, the trustee publishes a notice of sale of the property in the newspaper of general circulation. A notice of sale wants not only the borrower, but also the other lienholders the property is being sold to recover the money's own against it. The notice must appear weekly in the sale cannot take place until at least 20 days have elapsed from the first day of publication. Additionally, a notice of sale must be sent to the borrower, and posted on the property.
At the sale, usually a public auction, any person, including the debtor or creditor, may bid. The trustee can reject any or all inadequate bids and can postpone the sale and there are no acceptable bids. Otherwise, the sale is made to the highest bidder. The purchaser receives a trustee's deed, which eliminates all liens and junior and the trustee being foreclosed, and any interest in the debtor had in the property.
The entire process of selling property for the power of sale clause in a deed of trust may be accomplished in well under a year. There are, of course, expenses connected with a trustee's sale. Because no court is involved in the trust the foreclosure process, it is impossible to obtain a deficiency judgment in the trustee's sale. A deficiency judgment may only be granted by the court of law. The courts are not involved in the trustee's sale process. If the sale of the property fails to cover the debt, the beneficiary cannot then sue the debtor for the remainder. He or she must be satisfied with the proceeds of the trustee's sale. |