Step 1 – Default
Step 1 is to review the note…
Any foreclosure process begins with a review of the note and deed of trust to determine whether a default has occurred. The most obvious act of default by a mortgagor will be some violation or default of the repayment terms of the note.
However, failure to pay ad valorem property taxes or required insurance premiums on the subject property are also basic acts of default as well. Upon the act of default by a mortgagor, a review of the foreclosure provisions will describe how the property may be foreclosed upon.
The mortgagor may have waived certain rights to notice of the default or conversely, he may have insisted certain notices of default be issued by the mortgagee. Any such notices, such as notice of intent to accelerate, must be given if not contractually waived by the mortgagor.
However, most notes do contain such waivers. As to the deed of trust, it is a document by which the mortgagor (grantee under the deed of trust) conveys the subject property in trust to a trustee named in the deed of trust. Such trust is established for the benefit of the mortgagee (beneficiary under the deed of trust) so that the mortgagee can exercise its foreclosure rights without resorting to a lawsuit. The aforementioned trustee is technically the individual who conducts the foreclosure process. However, it is typical for a mortgagee to name a substitute trustee at the option of the mortgagee. The act of substituting a trustee is described later in this information.