Trustees Guarantee Title Policy - Vas Ist?
Since I'm in the presence of people who obviously understand a lot of stuff - the following two questions
(1) what is a trustees guarantee title policy? Does it come into being after the sale or before? If before, is it possible to see it before the sale?
(2) If I hold a second and I foreclose - does that act automatically foreclose the first? Ignore for the moment DOS clauses - can I merely start making the payment on the first and then wait to see if they invoke a DOS clause, or does the first automatically foreclose when I foreclose.
Example 100K 1st, 20K 2nd, 10K 3rd. Second holder forecloses, bids 120K and gets the bid. Is he automatically required to pay off the first, or is that the result of a set of decisions by the first?
Thanks in advance
I can only help you with your German.
The phrase I think you are trying to use is Was ist das?
TSG is like a title policy for a trustee. You may recall that the trustee is the entitiy that actually holds naked title to a secured piece of real estate and who directs the sale of the trustor's (legal owner) asset to satisfy the demand of the Beneficiary (note holder) A trust deed is a three part instrument. Not the same as a mortgage (two part instrument). California and many others use trust deeds as they grant power of sale to the trustee and are much superior to a mortgage for many reasons to numerous to go into here) Anyway back to your question. The trustee in order to fulfill his legal obligations, if called upon to sell the security, must notify all parties with interest to the property that a sale is going to take place. Therefore a TSG is the trustees way of knowing who to notify. A sale could for example be invalidated if there was a fourth TD who was wiped out by a sale of the second. So a 'TSG makes sure that all parties, including the parties junior are notified. These apply to recorded interest only, unless the trustee has actual notification of some unrecorded lien. Can you see a TSG prior to sale? Maybe. You would have to call the Trustee. You can buy or order and not buy a preliminary title policy from a title company. You can do your own title search. If you are a Broker trying to market the property prior to a foreclosure you might get a glimpse. Maybe if you went to the Trustee/Foreclosure company conducting the sale you might be able to view it. Bribes might help. Good luck
Let's take this step by step. If, as in your example the second of 20K was in foreclosure and you want to bid on it then you would be bidding on the second's position only, and subject to the right's of the first. If you are the successful bidder then the rights of the 3rd and 4th are extinguished, unless there is an irregularity in the proceedings (see TSG discussion above) If there is a great deal of equity in the property above the amounts owed on the 1st, 2nd, taxes, arrearages, fees, and any other lien attached (Fed/State Taxes/mechanics liens etc. etc.) to the property then you might expect that the bidding for the 2nd would exceed the face value of the note, i.e, 20k. So perhaps if there was equity in the property you might end up paying 30k for the 2nd, as you and others bid for the right to purchase. Beware though at this time that there may still be other encumbrances not of record as mentioned above. Therein lies much of the risk. If you are the successful bidder you will get a Trustee's deed for your money but it will be subject to the rights of the 1st. If the first is current, or if you can cure the first if it too was in default then you will have to continue making the monthly paymnents on it and of course all of the other obligations of ownership. Can the 1st accelerate their loan, very likely they will have the right to. It depends on the terms of their note, which you would like to take a look at. On the other hand, they may bluff you just to get you to pay off the note. If the interest rate is relatively high they may just let it ride and wait until it is to their advantage to invoke the alienation/accleration clauses in their note and Trust deed. But you will not have to pay the 1st lender off at the foreclosure sale, but have a plan for handling it if they call their note afterwards. Good Luck.
Laancer - thanks so much for the detailed info.
Do you know whether there is any legal theory that requires the holder or trustee for the first to give a copy of the first note to a person who wins the foreclosure auctoion on the second? Come to think of it, what does the owner of the second give me if I bid and win at a forecloseure of the second? Does he sign the 2nd note over to me?
And Dave - thanks for the reminder - I must admit I remembered it phonetically (in fact I took a year of Deusch but that was over 50 years ago.)
Neither the Beneficiary or the Trustee will give you anything at all. It is a matter of public record so you must go find out for yourself. You can bet they will know what their rights are and if they want to invoke them they will. Secondly, if you are the successful bidder on the second you will get a Trustee's deed. Remember the trustee held naked title with the power of sale. So he will convey the property to you and you will be the new owner subject to the rights of the first specifically and any other liens that are attached and have priority to the one you just bought. At this time the second TD holder gets paid the money that you bid for his note, the note ceases to exist, so yo have no contact with him unless he is at the auction trying to outbid you.
You say it well Lancer, I like the naked part. I always used true title but then I was brought up in a Puritan family who drank.
One small matter that bears noticing.
Subordinated devices present in the body of the deed of trust. Something like a small mine field.
Example:
I buy a house from a nice man and as part consideration of sale he agrees to subordinate to a new first trust deed at some latter date when I decide to borrow on such an instrument and build a large garage to shield by 1922 Model T.
The new Deed of Trust goes on and the old one created at purchase slides to second position.
In a moment of mad passion I decide I hate the old owner of the property and I wish to stop paying on his Note and Trust Deed. I substitute Trustee in the new Note and Trust Deed and he starts a foreclosure cause I have not paid on the note.
A policy of title insurance comes out from Commonwealth Land Title Co. and it shows in accordance with date of recordation. The old Note and Deed of Trust created at time of purchase right there in number one position.
the NOD is filed, Prelim Policy comes out nobody catches the subordinated clause. Goes to sale, sale is held. Only one overbid Dr. Haklepus overbids one dollar. Your captive substituted Trustee executes Trustee Deed on Sale to Dr. Haklepus.
Question: Is the old subordinated Deed of Trust now a second is it eliminated ?
You would be suprised to know who really wants an answer to that one. For one I know that Commonwealth Land Title Company does not want to know.
Hint, I think there was a previous case involving Title Insurance and Trust Co. somewhere around 1960.
Quick answer all injured parties sue the Title Company, they should have spotted it. What do you think? Fraudulent Intent, just careless. Is that standard of care expected from a lowly searcher for the Title Co.? Who is Dr. Haklepus? Groucho Marks?
See the kind of stuff I get involved in and all I am trying to do is just get along.and build houses from Old Steel Shipping Containers called ISO's ?
Cheers Lucius