Trustee’s foreclosure procedures

Under the power-of-sale provision contained in security devices such as a trust deed, a trustee records a notice of default (NOD) to initiate a trustee’s foreclosure when instructed by the beneficiary to do so on residential property.

After an NOD is recorded, an owner or junior lienholder may bring current any monetary or curable default stated in the NOD at any time prior to five business days before the trustee’s sale, called the reinstatement period.

To hold the auction and sell the residential property, the trustee needs to begin advertising and post a Notice of Trustee’s Sale (NOTS) at least 20 days before the date of the sale. The property may be sold by the trustee no sooner than the 21st day after advertising begins and the posting of notice occurs. [See RPI e-book Real Estate Finance, Chapter 42]

When the billing address of the defaulting owner is different from the mortgaged property’s address, an additional notice, a Notice of Sale, needs to be posted on the property concurrent with the NOTS. [See RPI Form 474-1]

The notice states in English and five other mandated languages that any tenant has the right to a 90-day notice to vacate the property. A copy of the tenant’s rights is also to be mailed at the time of posting to the “Resident of property subject to foreclosure sale.” [Calif. Civil Code §2924.8(a); see RPI Form 474-1]

Like the NOD, the NOTS needs to contain a summary of key information in the language the mortgage was originally negotiated in. [CC §2923.3; see RPI Form 474-2]

These languages are:

  • Chinese;
  • Korean;
  • Spanish;
  • Tagalog; or
  • Vietnamese. [See RPI Form 474-3 through 474-7]

Related video:

Sold to the highest bidder

A trustee’s sale is a public auction by private agreement where the property is sold by the trustee to the highest bidder. [See RPI e-book Real Estate Finance, Chapter 44]

Related video:

The trustee’s sale is held in the county where the secured real estate is located.

Before the auction begins, the trustee may:

  • demand all prospective bidders to show evidence of their financial ability to pay as a precondition to recognizing their bids; and
  • hold the prospective bidders’ amounts for bidding.

A bidder at auction can tender their bid amount in U.S. dollars in the form of:

  • cash;
  • a cashier’s check drawn on a state or national bank;
  • a check issued by a state or federal thrift, savings and loan association (S&L), savings bank or credit union; or
  • a cash equivalent designated by the trustee in the NOTS, such as a money order. [CC §2924h(b)(1)]

Each bid made at a trustee’s sale is an irrevocable offer to purchase the property. However, any subsequent higher bid cancels a prior bid.

The trustee’s sale is considered final on the trustee’s acceptance of the last and highest bid.

Once the highest bid has been accepted by the trustee, the trustee may require the successful bidder to immediately deposit the full amount of the final bid with the trustee.

When the successful bidder tenders payment by a check issued by a credit union or a thrift, the trustee can refrain from issuing the trustee’s deed to convey title to the property until the funds become available. [CC §2924h(c)]

Related article:

MLO Mentor: Notice of Default & Notice of Trustee’s Sale

The Notice of Trustee’s Sale — Summary of Key Information

A trustee uses the Notice of Trustee’s Sale — Summary of Key Information published by RPI when posting an NOTS on a residential property. The form provides the occupants a summary in English of the eminent foreclosure sale and its effect on their right to occupy the property. [See RPI Form 474-2]

The trustee fills out the blanks on the form with the necessary information, including:

  • the name of the trustor;
  • a description of the property;
  • the trust deed or mortgage;
  • the date of the trust deed or mortgage;
  • the total amount due in the notice of sale;
  • the date and time of the scheduled trustee’s sale;
  • the location of the sale;
  • a telephone number for information regarding the trustee’s sale;
  • the case file number; and
  • the telephone number they may call for additional copies of the summary. [See RPI Form 474-2]

Translations of the summary are available in:

Related article:

Form-of-the-Week: Request for Notice of Default (NOD) and Notice of Trustee’s Sale (NOTS) – Forms 412 and 474

The Notice of Sale

A trustee uses the Notice of Sale published by Realty Publications, Inc. (RPI) when posting an NOTS on a residential property. The form allows the trustee to notify the occupants of the eminent foreclosure sale and its effect on their right to occupy the property. [See RPI Form 474-1]

The Notice of Sale contains a statutorily mandated notice in English and five languages informing the occupant the foreclosure process has begun on the property, which may affect their right to continue to live in the property. 20 days or more after the date of the notice, the property may be sold at foreclosure. The notice advises the occupant to contact a lawyer, local legal aid office or housing counseling agency to discuss any rights they may have. [See RPI Form 474-1]

The Notice of Sale contains a translation of this message in five languages, including:

Want to learn more about foreclosure procedures? Click the image below to download the RPI book cited in this article.