How Does a Substitution of Trustee Notice Affect My Lien on a Property?
Full Question:
Answer:
Deeds of trust, at the time they are recorded, identify the trustor (borrower), the beneficiary (lender), and the trustee. The trustee is usually a corporation, and holds what has been characterized as "bare legal title" to the property. The trustee has two main jobs. The first is to reconvey the deed to the buyer when the loan is paid off. The second job is when requested by the lender, to handle a non-judicial foreclosure of the property.
Lenders contract with foreclosure companies to handle their foreclosure. The lender replaces the existing trustee with the foreclosure company it hires to handle the foreclosure. The foreclosure company becomes the "substitute trustee" as the result of their designation in a "substitution of trustee" form that is signed by the lender, naming the foreclosure company as the "substitute trustee" once that form has been recorded.
A lien may also be created by filing a security interest in the property, such as when a mortgage is recorded in the county recorder's office. Priority of liens is generally determined by the date of recording. Often, the lender will have priority over any later filed liens (junior creditors), and the liens junior creditors hold will only be able to be collected out of any remaining proceeds after the mortgage holder is paid. If the property securing the mortgage is sold in foreclosure and no proceeds remain to pay junior creditors, it is possible the junior creditors could attach other assets of a judgment debtor.
