Mortgage Meltdown: Foreclosure Offense or Defense in Trustee or Non-Judicial Sales

People have to be careful in Arizona and other states that use the “Trustee” method of conducting sales of property that are allegedly in default. In fact they should be careful even without being in default. You might be at risk of receiving a claim for payment from two or more sources. each claiming standing to collect and sue.  

Careful attention must be paid to the procedures in your state as to how to contest the default and prevent the sale. Of course, Bankruptcy is one avenue, and then a challenge to the authority of the trustee by alleging that he is not receiving information, authorization or instructions from the true “‘owner” of the mortgage and note. He is also not receiving payments so he can’t verify within his own knowledge that you ARE in default. And he can’t defend your allegations that you were tricked and defrauded by the lender who used coercion and deceit to get you to think the property was worth more than it was and accordingly charged you more in points, interest, fees, costs, and other damages.  

Whether your property is in foreclosure or not, a letter should be sent, via certified mail, challenging eh right of the trustee to act as trustee, since the original parties have been changed and you have not agreed to the change, nor have you been advised of the change by being given adequate notice of the terms of the transfer of the mortgage and note from one lender to another, or from a lender to a mortgage investment aggregator, or to an investment banker or to an investor. 


Quick Facts 

–  Judicial Foreclosure Available: Yes

–  Non-Judicial Foreclosure Available: Yes

–  Primary Security Instruments: Deed of Trust, Mortgage

–  Timeline: Typically 90 days

–  Right of Redemption: None

–  Deficiency Judgments Allowed: Varies

In Arizona, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process. 


Judicial Foreclosure

The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, your home will be auctioned off to the highest bidder. 


Non-Judicial Foreclosure

The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A “power of sale” clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the “Power of Sale Foreclosure Guidelines”.

Power of Sale Foreclosure Guidelines

If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:

1. The trustee must record a notice of sale in the office of the recorder of the county where the property is located. Within five (5) days after the notice is recorded, the trustee must mail, by certified mail, a copy of the notice of sale to each of the people who are parties to the trust deed, except for himself. Additionally, the notice must appear in a newspaper in the county where the property is located once a week for four (4) consecutive weeks, with the last notice being published not less than ten (10) days prior to the date of the sale.

Optionally, if it can be done without a breach of the peace, the trustee can post the notice at least twenty (20) days prior to the date of the sale, in some conspicuous place on the property to be sold and/or he or she can post the notice at the courthouse or at a specified place at the place of business of the trustee in the county in which the property is located.

2. The trustee or the trustee’s agent must conduct the sale. The sale is for cash to the highest bidder, except that the lender can make a “credit bid,” which means to cancel out some part (or all) of the money the borrower owed the lender on the lean, instead of paying cash. A successful high bidder must pay the bid price by 5 pm of the day after the bid, other than a Saturday or legal holiday. Every bid is an irrevocable offer until the sale is completed, which happens when the bidder pays the bid price to the trustee’s satisfaction. If the high bidder fails to make the payment by 5:00 pm, the day after being notified of the option to buy, then the trustee may postpone the sale.

The trustee may postpone the sale to another time, or another place, by giving notice of the new date, time and place by public declaration at the last place and time the property was offered for sale. No other notice is required. A trustee may also, by written agreement, extend the time for a buyer to come up with the payment. 

3. Once the sale is complete, the proceeds will go to the payment of the obligations secured by the deed of trust that was foreclosed, then to junior lien holders in order of their priority. The successful bidder gets a trustee’s deed, which provides conclusive evidence that the trustee conducted the foreclosure sale property.

A note regarding Deficiency Suits: A lender may not bring a deficiency suit against a person who lost a property that is 2.5 acres or less at a foreclosure, provided the property was a single one-family or a single two-family dwelling. This is so even if the high bid at foreclosure was less that the balance due on the loan. However, in foreclosures against other types of property, a deficiency suit is allowed, but is limited to the difference between the balance owed and the fair market value of the property, and then only if the suit is brought within ninety (90) days of the power of sale foreclosure. 

10 Responses

  1. In Michigan, the trustee CANNOT postpone the sale to another time. There is NO statute allowing them to do that. However, the mortgagee can postpone the the sale if the need arises.
    MCL 600.3220 Sale; adjournment; notice; posting; publication.
    Sec. 3220.
    Such sale may be adjourned from time to time by the sheriff or other officer or person appointed to make such sale at the request of the party in whose name the notice of sale is published by posting a notice of such adjournment before or at the time of and at the place where said sale is to be made, and if any adjournment be for more than 1 week at one time, the notice thereof, appended to the original notice of sale, shall also be published in the newspaper in which the original notice was published, the first publication to be within 10 days of the date from which the sale was adjourned and thereafter once in each full secular week during the time for which such sale shall be adjourned. No oral announcement of any adjournment shall be necessary.

    History: 1961, Act 236, Eff. Jan. 1, 1963 (underlines added)

  2. Hey Jose, run your case by the trustee who more than likely will not do a thing; request for leave to file the case in C Court, not to worry about the lender, he will remove to Fed Court. Lost Note, fight it long, hard and strong! They must produce the original copy, do not accept less; also, make them produce payment history and history of charges; they have committed fraud, so, you have the one up! They sold you a bag of C_ _ _ here…the property at any price was more than likely overvalued by the lenders appraiser and the unsustainable market conditions for which all we innocent, were lead to slaughter by government lies, i.e., housing markets are sustainable and growth is sustainable, both lies! Investigate your judge and his rulings and get a membership to pacer to track your case because clerical errors do happen and no one but you, is responsible for your case under bap! Check out your judges rulings, look for similar trustees to always be presenting their cases, if there is justice financial disclosure information about the judges, gov courts pensions and retirement accounts etc., and, as to if they contain any of the mortgage hedge funds. Go to your judges hearings to see how he rules and for whom he rules; check out the judges former partners and law firms prior to them becoming a judge, look to see if they represented any of your creditors or most of your creditors or your lender, servicer, title company etc. My most important advise to you is not to lie during your bk, before or after….about anything….in, leading up to, after or during your bankruptcy, sounds like you are upper middle class so do not hide any…assets as with your charges of mortgage fraud, they will be seeking a smoking gun….and the gun will get turned on you the accuser first! You will not have to hide your assets as most of your assets are protected as long as you do your schedules correctly. Your case appears to be an asset recovery case and the courts should either allow you time to pursue your legal claims or, have the trustee litigate your claims for you, noting you could be in an area that is devoid of these corrupt bankruptcy rings, just be on guard at all times and follow behind your public servants, the judges and trustees as the are human and can be mislead!

  3. Thanks for the input K, I filed for BK today pro se
    I was totally unable to find and attorney with the enough guts in Virginia to take on these crooked lenders.

    There also another issue in our wonderful state, there is a statute that allows for the lenders to provide a lost note affidavit, most of these affidavits are fraudulent, these lenders and servicers never saw or even received this documents, they are being signed and notarized in back room offices, and using them to foreclose on all these families that were lied and cheated of all their life savings. I poured more than $500,000 of my savings into our home, for these lenders to take me to the cleaners.

    What can realistically be done about these lost note affidavits, contest their validity?.

    I did my mortgage audit and that is the best tool I have found, most attorneys unfortunately are intimidated by the Rocket Docket here in Virginia.

  4. Jose; You have one year from the date of rescission notice to file a lawsuit in the courts to enforce the rescission but, if you are under foreclosure now, you must move fast! If you have received the notice of sale, you must consult your local court law library for the laws, talking with the law clerks who should be able point you to your local laws. Then contact the courts and notify them immediately of your intent to defend against the action and at that time, present the complaint onto the court as your defense or file the complaint as soon and as quick as you can. I am not a lawyer but am suing my lender for mortgage loan document forgery and mortgage fraud, the dirty rotten sobs have perpetrated against my once very good credit. RESPA & TILA laws are very complex, you really should try to find an honest lawyer, though, we have had no luck here in Maryland because most are corrupt or work for the creditor behind your back or want to lend you the same creditors money or, if they are not currently working for the creditor, they will be by the time it is all over so be careful if the lawyer takes your case and then does nothing, this is what they do, the corrupt lawyer usually will fleece you for every penny you have so you then have no….money and then, after he strips you of the money, he allow the trustee to sell the property or, encourages you to refinance, never assisting you with the RESA and TILA lawsuit, or, this is what has happened to us! Be careful of corrupt bankruptcy judges and trustees if you are thinking about going this way. There is a more sophisticated consumer scam known as the bankruptcy foreclosure scam wherein your lawyer, the bk trustee and judge conspire to steal your property and force you into a life of high cost credit! How the scam works, you innocently find one of these corrupt lawyers for whom most practicing bk in our area are dirty, rotten and corrupt sobs because they must join the corrupt thing known as the “bankruptcy club”,(do your research, this is a club of corrupt judges, trustees and outside lawyers who serve victims up to these clubs); the would be consumer lawyer generally lends money for your….lender with the lawyer failing to ever tell the consumer they have a conflict of interest. Once the corrupt lawyer files the stay for you the victim, he then does nothing…..tells you nothing, does not assist with the schedules, files nothing but begins to work with the corrupt trustee wherein they both collude together to harm you under the courts eyes with the corrupt judge presiding over the whole thing but, essentially, they collude to have the case dismissed making you out to be the villain so they have scared you in the judicial eyes of all courts. If you make to the 341 meeting, you are then met by the corrupt trustee who also, without you knowing, works for your same lender or most of your creditors, and this corrupt trustee ignores your TILA and RESPA claims; and, the screwed up BK draconic laws, essentially allow him to ignore your claims; he will have no part of litigating your claim and will shut you up but quick! The lender now has you where he wants you, in the bk club…..with the judge being placed there to hear a particular lender/investment banks cases exclusively. The corrupt judge, then works in tandem with your lawyer who is to first get you to refi the loan in order to cause you to waive your legal recourses; should you have figured out what is going on, and refuse the refi, then the lender seeks the lift stay, your lawyer may appoint himself as special counsel to the trustee, to make sure you are silenced, and then the judge orders the property sold; be very, very, very careful because you are dealing with the mafia and consumers and honest lawyers have been killed! If you are already there, or in bk and this is happening, motion to dismiss your case and file lawsuit in your circuit court; the courts cannot force a discharge on you. Good luck, Best R, k

  5. How can I stop a substitute trustee from foreclosing on a property where the borrower exercised his right of rescission due to TILA, RESPA, UDAP, etc violations. The lender and the foreclosure attorney have disregarded to rescission and the lender never intended to negotiate the tender offer?

    Thanks for your info it is fantastic

  6. […] makis2844 wrote an interesting post today onHere’s a quick excerptA “power of sale” clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a … […]

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