Challenging the “Free House” Myth

Unless you are banker stealing homes through the fraudulent abuse of the foreclosure process there is no free house.

It is not rationale nor legal for anyone to tell a homeowner that because he or she cannot identify the source of funds for their “loan” the creditor MUST be in the chain of the party making the claim. It isn’t the fault of the homeowner that the paperwork was used to cover up fraud or negligence.

But every time a homeowner wins they do not necessarily get a free house nor exoneration from the debt that is owed to SOMEBODY even if they don’t know who it is.

Get a consult! 202-838-6345 to schedule CONSULT, leave message or make payments.

The bar remains high and we all know it. The court is not going to hand down a decision for the “borrower” unless there is something plainly wrong about it. In order to be plainly wrong, we need some narrative that puts the court back on its heels and to directly challenge the notions that a victory for Flaherty means that he gets a free house. The banks have stepped up their “free house” mythology in light of the Supreme Court decision in Florida.

The challenge here is to to present the case in a manner that makes the “free house” myth irrelevant and to do it in a compelling presentation. While the easiest way of doing that would be to allege simply that this is a fraudulent scheme, we can’t prove that without adequate responses to discovery. But the Courts are allowing the banks to skate through without responding to discovery even when the allegations clearly make the scheme an issue.

This is why the banks file motions to strike OR simply argue that the homeowner’s pleadings don’t state a case or defense.

So we are left with the consequences of the scheme. But that leaves fertile ground for many approaches. The focus should be on procedural aspects and away from “winning” the case on motions. The object is to win the pending motion on the grounds that due process demands it. The trick here is to find a way to ask the judge “What if all this is an illusion?” without asking it in those words. That is an uphill climb.

We cannot ignore the fact that the bench is biased in favor of the banks. Their presumption that the homeowner received a loan and should be required to pay it back or lose his home permeates everything. The greater hurdle is that their presumption comes from an era when those things were axiomatically true before Wall Street started with this scheme. And now everything is being subjected to claims of “securitization.” Even cell phone payments. “Securitization” has been institutionalized based upon a false foundation, but in theory there is nothing wrong with it.

The money trail remains the primary path toward victory for the homeowner. But it is true that there are certain aspects of the money trail that are none of your business when defending the homeowner. The fact that the banks defrauded investors and stole their money is compelling proof, once established, that the trusts were never funded and thus never purchased the loans. It also suggests but does not prove where the money came from for the “loan closing.” It came from a dark pool formed by the banks and consisting of the stolen money.

Knowing that, rather than proving that, is key to establishing the narrative. And now there are instances in which the “new” REMIC Trust actually does pay for the paper even though the Seller never owned the debt and the paper was based upon a fictitious transaction in which the Payee on the note never loaned any money — leading to the conclusion that the debt was never merged into the note; but this also leads to the conclusion that the risk shifts to the maker of the note when the note is purchased for value, in good faith and without knowledge of the borrower’s defenses. The new Purchaser” who really paid consideration (assuming they REALLY paid) could conceivably be a holder in due course. The focus then shifts to showing that there was no good faith and that there was complete knowledge of the borrower’s defenses on the part of the purchaser.

Knowing that the parties making the claim have no legal basis for doing so and no monetary reason for doing so — because the source of funds were victims of fraud — allows the litigator to focus on the factual and legal consequences. But the art form required here is to do that without making it look like you are allowing the homeowner to slip away from the debt. Getting there means getting past preliminary motions and aggressively pursuing discovery (unless you think that the bank’s case is defective enough such that it would be better to wait until trial to defend).

Powers of Attorney — New Documents Magically Appear

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.


BONY/Mellon is among those who are attempting to use a Power of Attorney (POA) that they say proves their ownership of the note and mortgage. In No way does it prove ownership. But it almost forces the reader to assume ownership. But it is not entitled to a presumption of any kind. This is a document prepared for use in litigation and in no way is part of normal business records. They should be required to prove every word and every exhibit. The ONLY thing that would prove ownership is proof of payment. If they owned it they would be claiming HDC status. Not only doesn’t it PROVE ownership, it doesn’t even recite or warrant ownership, indemnification etc. It is a crazy document in substance but facially appealing even though it doesn’t really say anything.

The entire POA is hearsay, lacks foundation, and is irrelevant without the proper foundation be laid by the proponent of the document. I do not think it can be introduced as a business records exception since such documents are not normally created in the ordinary course of business especially with such wide sweeping powers that make no sense — unless you recognize that they are dealing with worthless paper that they are trying desperately to make valuable.

They should have given you a copy of the settlement agreement referred to in the POA and they should have identified the original PSA that is referred to in the settlement agreement. Those are the foundation documents because the POA says that the terms used are defined in the PSA, Settlement agreement or both. I want all documents that are incorporated by reference in the POA.

If you have asked whether the Trust ever paid for your loan, I would like to see their answer.

If CWALT, Inc. or CWABS, Inc., or CWMBS, Inc is anywhere in your chain of title or anywhere else mentioned in any alleged origination or transfer of your loan, I assume you asked for those and I would like to see them too.

The PSA requires that the Trust pay for and receive the loan documents by way of the depositor and custodian. The Trustee never takes possession of the loan documents. But more than that it is important to distinguish between the loan documents and the debt. If there is no debt between you and the originator (which means that the originator named on the note and mortgage never advanced you any money for the loan) then note, which is only evidence of the debt and allegedly containing the terms of repayment is only evidence of the debt — which we know does not exist if they never answered your requests for proof of payment, wire transfer or canceled check.

If you have been reading my posts the last couple of weeks you will see what I am talking about.

The POA does not warrant or even recite that YOUR loan or anything resembling control or ownership of YOUR LOAN is or was ever owned by BONY/Mellon or the alleged trust. It is a classic case of misdirection. By executing a long and very important-looking document they want the judge to presume that the recitations are true and that the unrecited assumptions are also true. None of that is correct. The reference to the PSA only shows intent to acquire loans but has no reference or exhibit identifying your loan. And even if there was such a reference or exhibit it would be fabricated and false — there being obvious evidence that they did not pay for it or any other loan.

The evidence that they did not pay consists of a lot of things but once piece of logic is irrefutable — if they were a holder in due course you would be left with no defenses. If they are not a holder in due course then they had no right to collect money from you and you might sue to get your payments back with interest, attorney fees and possibly punitive damages unless they turned over all your money to the real creditors — but that would require them to identify your real creditors (the investors who thought they were buying mortgage bonds but whose money was never given to the Trust but was instead used privately by the securities broker that did the underwriting on the bond offering).

And the main logical point for an assumption is that if they were a holder in due course they would have said so and you would be fighting with an empty gun except for predatory and improper lending practices at the loan closing which cannot be brought against the Trust and must be directed at the mortgage broker and “originator.” They have not alleged they are a holder in course.

The elements of holder in dude course are purchase for value, delivery of the loan documents, in good faith without knowledge of the borrower’s defenses. If they had paid for the loan documents they would have been more than happy to show that they did and then claim holder in due course status. The fact that the documents were not delivered in the manner set forth in the PSA — tot he depositor and custodian — is important but not likely to swing the Judge your way. If they paid they are a holder in due course.

The trust could not possibly be attacked successfully as lacking good faith or knowing the borrower’s defenses, so two out of four elements of HDC they already have. Their claim of delivery might be dubious but is not likely to convince a judge to nullify the mortgage or prevent its enforcement. Delivery will be presumed if they show up with what appears to be the original note and mortgage. So that means 3 out of the four elements of HDC status are satisfied by the Trust. The only remaining question is whether they ever entered into a transaction in which they originated or acquired any loans and whether yours was one of them.

Since they have not alleged HDC status, they are admitting they never paid for it. That means the Trust is admitting there was no payment, which means they were not entitled to delivery or ownership of the note, mortgage, or debt.


So if they did not allege they are an HDC then they are admitting they don’t own the loan papers and admitting they don’t own the loan. Since the business of the trust was to pay for origination of loans and acquisition of loans there is only one reason they wouldn’t have paid for the loan — to wit: the trust didn’t have the money. There is only one reason the trust would not have the money — they didn’t get the proceeds of the sale of the bonds. If the trust did not get the proceeds of sale of the bonds, then the trust was completely ignored in actual conduct regardless of what the documents say. Which means that the documents are not relevant to the power or authority of the servicer, master servicer, trust, or even the investors as TRUST BENEFICIARIES.

It means that the investors’ money was used directly for fees of multiple people who were not disclosed in your loan closing, and some portion of which was used to fund your loan. THAT MEANS the investors have no claim as trust beneficiaries. Their only claim is as owner of the debt, not the loan documents which were made out in favor of people other than the investors. And that means that there is no basis to claim any power, authority or rights claimed through “Securitization” (dubbed “securitization fail” by Adam Levitin).

This in turn means that the investors are owners of the debt but lack any documentation with which to enforce the debt. That doesn’t mean they can’t enforce the debt, but it does mean they can’t use the loan documents. Once they prove or you admit that you did get the loan and that the money came from them, they are entitled to a money judgment on the debt — but there is no right to foreclose because the deed of trust, like a mortgage, is made out to another party and the investors were never included in the chain of title because the intermediaries were  making money keeping it from the investors. More importantly the “other party” had no risk, made no money advance and was otherwise simply providing an illegal service to disguise a table funded loan that is “predatory per se” as per REG Z.

And THAT is why the originator received no money from successors in most cases — they didn’t ask for any money because the loan had cost them nothing and they received a fee for their services.

Unfortunate Decision of 9th Circuit

Hat tip to Darrell Neilander and Charles Cox for bringing this one to my attention.

Editor’s Comment: In a twisted display of circular reasoning and reverse logic, the 9th Circuit has issued an opinion that attacks the precise foundation of the Truth in Lending Act. Go to any seminar on TILA and the first thing they will tell you is that the purpose of the act was to provide the borrower with choice of lenders and the ability to apply competitive pressures on one lender versus another.

If a Borrower wants a loan and does NOT want it with Wells Fargo or Merrill Lynch for reasons of his own, then he has a specific right explicitly stated in TILA to know who the lender is and all the parties who received compensation in putting the loan package together for sale to the borrower and sale to the investors. Under Gale vs. Franklin, 686 F. 3d 1055, July 12, 2012, the 9th Circuit said that the right to know the owner of the loan does not apply if you are dealing with the servicer. This directly conflicts with the intent and content of the FCFB definitions in addition to defying  logic. It also strips the specific remedy of clawback of undisclosed compensation.

An additional reason for knowing the name of the obligee is to be able to confirm the balance due and to apply for HAMP or HARP modifications or settlement. How can you do that if you don’t know who the “decider” is?

As for asking for the identity of the creditor, the court incredibly concluded that “Failing to read and respond to letters may be impolite; however, ²a breach of [*1057]  good manners² is not always ²an invasion of any legal right.²  Spaulding v. Evenson , 149 F. 913, 920 (C.C.E.D. Wa. 1906). Richard Gale faults his lender, First Franklin Loan Services (²Franklin²), for failing to respond to his correspondence regarding ownership of his loan, and alleges that this failure amounted to a violation of the Truth in Lending Act (²TILA²), and Nevada’s covenant of good faith and fair dealing. Because Franklin was not legally required to respond in its capacity as loan servicer, we affirm the district court’s dismissal of these claims. However, Gale also alleges [**2] that after failing to respond to his letter, Franklin and the other defendants engaged in illegal conduct by wrong-fully foreclosing on his property. We remand these remaining state law claims to the district court.”

So as an aside, the Court cleaned out the carcass of RESPA as well. This decision cannot and will not stand in my opinion and the entry of politics and ideology clearly clouded the real issues of due process, statutory duties, and justice. But worse, the court put its stamp of approval on screwing around with the title records corrupting them beyond recognition.

This Court has given a back-door to those who engaged in such behavior and left the title problems for future owners, lenders and beneficiaries of trusts. In my opinion I would continue to plead the same actions and bring it up on appeal — perhaps in the state appellate decisions and maybe even direct to the State Supreme Court on public policy and urgency for consistency in decisions.

But once again, we have admissions that helped the court along in this wrong application of the law. The “FACTS” are that Gale “refinanced his home with Franklin.” In order to recite those facts, it would have been necessary to have the borrower admit that the transaction was real and actually took place. Now if Franklin actually did the loan and it was not subject to claims of securitization, this might be an inevitable admission. But Franklin does not appear to be one of the exceptions of those banks that did not play securitization PONZI roulette. The “Facts” show otherwise. [As soon as you see MERS” you know claims of securitization are involved.]

The same applies to “Gale defaulted on the loan.” How did that get in the record unless Gale admitted it? How does Gale know that there was a payment due? He presumed it because Franklin was the originator. With what is in the public domain now, we know that the loan might well have been paid in full or paid in part or that the payments to the real creditor continued to be made even after the borrower stopped paying. If the payment was made, there was no payment due, and thus there could be no default. But the Borrower here appears to have admitted it.

The one sort of bone thrown out to borrowers, is that the Court concluded that if the Gale claim arose after passage of Dodd-Frank, the results might have been different. They completely missed the point that the rules and regulations in Dodd-Frank were already stated or inherent under common law and existing statutory law, both Federal and State.

In short, the 9th Circuit is treating the sham transactions and strawmen of the fake securitization scheme with the deference one might give to a king. If the shoe was on the other foot, such behavior would not be tolerated for even a moment. Can you imagine the same court finding that a borrower does not need to disclose his principal in a loan? This decision is twisted, absurd and wrong.

by Charlie Guy

In Gale v. First Franklin Loan Services, 686 F.3d 1055 (9th Cir. 2012), the Ninth Circuit held that a borrower has no right under the federal Truth in Lending Act (“TILA”) to require a loan servicer to identify the owner of a loan obligation. TILA requires a servicer to identify the owner of the loan only when the servicer owns the loan, and only when the servicer owns the loan by assignment.

In Gale, the borrower refinanced his home mortgage with First Franklin Loan Services, which both originated the loan and serviced it. After the borrower became delinquent, he demanded First Franklin identify the “true” owner of the obligation. First Franklin ignored the requests and proceeded with foreclosure. The borrower filed suit claiming, in part, a violation of TILA. The trial court dismissed the TILA cause of action as a matter of law, and the Ninth Circuit affirmed.

On appeal, the borrower argued that the plain language of TILA, 15 U.S.C. Section 1641(f)(2), required First Franklin to respond to his inquiries regarding the identity of the owner of the loan. That section states that upon written request, “the servicer shall provide the obligor . . . with the name, address, and telephone number of the owner of the obligation . . .” The Ninth Circuit explained that this provision does not apply to all loan servicers, but only those servicers who are owners of the loan by assignment after loan origination. In this case, First Franklin was both the original lender and the servicer, so this section did not apply.

The Ninth Circuit also noted that, since a 2010 amendment to the Real Estate Settlement Procedures Act, all servicers must identify the owner of a real estate loan if requested, under all circumstances. This change, however, does not apply retroactively to claims (like the claim in Gale) that accrued prior to 2010.


Az Statute on Mortgage Fraud Not Enforced (except against homeowners)

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Editor’s Comment:

With a statute like this on the books in Arizona and elsewhere, it is difficult to see why the Chief Law Enforcement of each state, the Attorney General, has not brought claims and prosecutions against all those entities and people up and down the fraudulent securitization chain that brought us the mortgage meltdown, foreclosures of more than 5 million people, suicides, evictions and claims of profits based upon the fact that the free house went to the pretender lender.

Practically every act described in this statute was committed by the investment banks and all their affiliates and partners from the seller of the bogus mortgage bond (sold forward, which means that the loans did not yet exist) all the way down to the people at the closing table with the homeowner borrower.

I’d like to see a script from attorneys who confront the free house concept head on. The San Francisco study and other studies clearly show that many if not most foreclosures resulted in a “sale” of property without any cash offered by the buyer who submitted a credit bid when they had not established themselves as creditors nor had they established the amount due. And we now know that they failed to establish themselves as creditors because they neither loaned the money nor purchased the loan in any transaction in which they parted with money. So the consideration for the sale was not present or if you want to put it in legalese that would effect those states that allow review of the adequacy of consideration at the auction.

I’d like to see a lawyer go to court and say “Judge, you already know it would be wrong for my client to get a free house. I am here to agree with you and state further that whether you rule for the borrower or this pretender lender here, you are going to give a free house to somebody.

“Because this party initiated a foreclosure proceeding without being the creditor, without spending a dime on the loan or purchase of the loan, and without any right to represent the multitude of people and entities that should be paid on this loan. This pretender, this stranger to this transaction stands in the way of a mediated settlement or HAMP modification in which the borrower is more than happy to do a traditional workout based upon the economic realities.

“And they they maintain themselves as obstacles to mediation or modification because they have too much to hide about the origination of this loan.

“All I seek is that you recognize that we deny the loan on which this party is pursuing its claims, we deny the default and we deny the balance. That puts the matter at issue in which there are relevant and material facts that are in dispute.

“I say to you that as a Judge you are here to call balls and strikes and that your ruling can only be that with issues in dispute, the case must proceed.”

“The pretender should be required to state its claim with a complaint, attach the relevant documents and the homeowner should be able to respond to the complaint and confront the witnesses and documents being used. And that means the pretender here must be subject to the requirements of the rules of civil procedure that include discovery.

“Experience shows that there have been no trials on the evidence in all the foreclosures ever brought during this period and that the moment a judge rules on discovery in favor of the borrower, the pretender offers settlement. Why do you think that is?”

“If they had a good reason to foreclose and they had the authority to allege the required the elements of foreclosure and they had the proof to back it up they would and should be more than willing to put a stop to all these motions and petitions from borrowers. But they don’t allow any case to go to trial. They are winning on procedure because of the assumption that the legitimate debt is unpaid and that the borrower owes it to the party making the claim even if there never was transaction with the pretender in which the borrower was a party, directly or indirectly.”

“Neither the non-judicial powers of sale statutes nor the rules of civil procedure based upon constitutional requirements of due process can be used to thwart a claim that has merit or raises issues that have merit. You should not allow the statute and rules to be applied in a manner in which a stranger to the transaction who could not even plead a case in good faith would win a foreclosed house at auction without court review and a hearing on the merits.”

Residential mortgage fraud; classification; definitions in Arizona

Section 1. Title 13, chapter 23, Arizona Revised Statutes, is amended by adding section 13-2320, to read:



Those convicted of one count of mortgage fraud face punishment in accordance with a Class 4 felony.  Anyone convicted of engaging in a pattern of mortgage fraud could be convicted of a Class 2 felony

Motion Practice: Arizona Statutes Requires GOOD FAITH and ALL Parties to be Notified

The statute says that the trustee mails the notice to all affected parties at least three months before the sale date. In a non-judicial sale, then, ALL parties having a potential stake in the outcome must be notified. This is the only way the statute can be constitutional. It’s not up to the Trustee to adjudicate the rights of the parties if he wants to keep his exemption from liability, but if he knowingly fails to notify other parties whom he knows to exist, then it is obvious he is taking an interest in the litigation.

The attack on the trustee sale would simply be a certified letter followed by a lawsuit if necessary directed at the trustee. The letter would be an objection to the sale because the trustee has failed to notify the creditors, has not made adequate inquiry into the identity of all parties, and damages for slander of title. The objection, an early draft of which is contained in the forms on this blog,  would also state that the obligation has been satisfied in whole or in part by third party payments from credit default swaps, insurance, guarantees, buy-backs, federal bailouts etc.

The demand would be for proof of inquiry — the “pull-down report” (title report on the property) and all other efforts to identify the parties in what the trustee knows to be a securitized transaction with multiple intermediaries, each of whom appears to claim a stake in the property, and multiple creditors, none of whom have been notified, who have not provided or been asked to provide an accounting for all transactions relating to the their purchase of asset backed securities creating their beneficial ownership in a pool of assets that includes the subject loan, and whether any allocations have been made to account for third party payments.

In the alternative, the demand would be that the foreclosure be conducted in accordance with Arizona statutes governing judicial foreclosures that would then pout the onus on the beneficiary to allege they are they are the creditor, that the obligation is due and to present allegations and , exhibits, witnesses and proof that they are entitled to a judgment in foreclosure. The non-judicial statutes could not have been intended as a direct confrontation with the 5th and 14th Amendment of the United States Constitution requiring no deprivation of life, liberty or property without due process. If that were otherwise, the statute would be unconstitutional on its face.

33-455. Conveyance of absolute title by judicial sale; effect upon rights of persons not parties

Every conveyance of real property by a commissioner, sheriff or other officer legally authorized to sell such property by virtue of a decree or judgment of any court within this state, shall be effectual to pass absolute title to the property to the purchaser thereof, but the conveyance shall not affect the right, title or interest of any person other than the parties to the conveyance, decree or judgment, and those claiming under them.

33-456. Passage of title to real or personal property by judgment

When a judgment directs the conveyance of real property or the delivery of personal property, the judgment shall pass title to such property without any act by the party against whom the judgment is given.

33-458. Resale of realty with intent to defraud; classification

A person who, after selling, bartering or disposing of, or, after executing a bond or agreement for the sale of land, again knowingly and with intent to defraud previous or subsequent purchasers, sells, barters or disposes of, or executes a bond or agreement to sell, barter or dispose of the same land or any part thereof to any other person for a valuable consideration, is guilty of a class 4 felony.

33-705. Purchase money mortgage or deed of trust; priority

A mortgage or deed of trust that is given as security for a loan made to purchase the real property that is encumbered by the mortgage or deed of trust has priority over all other liens and encumbrances that are incurred against the purchaser before acquiring title to the real property.

33-706. Assignment of mortgage; recording as notice

An assignment of a mortgage may be recorded in like manner as a mortgage, and the record is notice to all persons subsequently deriving title to the mortgage from the assignor.

33-708. Release by attorney in fact

An attorney in fact to whom the money due on a mortgage or deed of trust is paid may execute the release provided for in this article. Such acknowledgment of satisfaction or deed of release, duly acknowledged and recorded, showing the docket and page or recording number, releases the mortgage or deed of trust and revests in the mortgagor or person who executed the deed of trust, or his legal representatives, all title to the property affected by the mortgage or deed of trust.

33-721. Foreclosure of mortgage by court action

Mortgages of real property and deeds of trust of a type not included in the definition of deed of trust provided in section 33-801, notwithstanding any other provision in the mortgage or deed, shall be foreclosed by action in a court.

33-722. Election between action on debt or to foreclose

If separate actions are brought on the debt and to foreclose the mortgage given to secure it, the plaintiff shall elect which to prosecute and the other shall be dismissed.

33-741. Definitions

In this article, unless the context otherwise requires:

1. “Account servicing agentmeans a joint agent of seller and purchaser, appointed under the contract or under a separate agreement executed by the seller and the purchaser, to hold documents and collect monies due under the contract, who does business under the laws of this state as a bank, trust company, escrow agent, savings and loan association, insurance company or real estate broker, or who is licensed, chartered or regulated by the federal deposit insurance corporation or the comptroller of the currency, or who is a member of the state bar of Arizona.

2. “Contract” means a contract for conveyance of real property, a contract for deed, a contract to convey, an agreement for sale or any similar contract through which a seller has conveyed to a purchaser equitable title in property and under which the seller is obligated to convey to the purchaser the remainder of the seller’s title in the property, whether legal or equitable, on payment in full of all monies due under the contract. This article does not apply to purchase contracts and receipts, escrow instructions or similar executory contracts which are intended to control the rights and obligations of the parties to executory contracts pending the closing of a sale or purchase transaction.

3. “Monies due under the contract” means:

(a) Any principal and interest payments which are currently due and payable to the seller.

(b) Any principal and interest payments which are currently due and payable to other persons who hold existing liens and encumbrances on the property, the unpaid principal portion of which constitutes a portion of the purchase price, as stated in the contract, if the principal and interest payments were paid by the seller pursuant to the terms of the contract and to protect his interest in the property.

(c) Any delinquent taxes and assessments, including interest and penalty, due and payable to any governmental entity authorized to impose liens on the property which are the purchaser’s obligations under the contract, if the taxes and assessments were paid by the seller pursuant to the terms of the contract and to protect his interest in the property.

(d) Any unpaid premiums for any policy or policies of insurance which are the obligation of the purchaser to maintain under the contract, if the premiums were paid by the seller pursuant to the terms of the contract and to protect his interest in the property.

4. “Payoff deed” means the deed that the seller is obligated to deliver to the purchaser on payment in full of all monies due under the contract to convey to the purchaser the remainder of the seller’s title in the property, whether legal or equitable, as prescribed by the terms of the contract.

5. “Property” means the real property described in the contract and any personal property included under the contract.

6. “Purchaser” means the person or any successor in interest to the person who has contracted to purchase the seller’s title to the property which is the subject of the contract.

7. “Seller” means the person or any successor in interest to the person who has contracted to convey his title to the property which is the subject of the contract.

33-807. Sale of trust property; power of trustee; foreclosure of trust deed

A. By virtue of his position, a power of sale is conferred upon the trustee of a trust deed under which the trust property may be sold, in the manner provided in this chapter, after a breach or default in performance of the contract or contracts, for which the trust property is conveyed as security, or a breach or default of the trust deed. At the option of the beneficiary, a trust deed may be foreclosed in the manner provided by law for the foreclosure of mortgages on real property in which event chapter 6 of this title governs the proceedings. The beneficiary or trustee shall constitute the proper and complete party plaintiff in any action to foreclose a deed of trust. The power of sale may be exercised by the trustee without express provision therefor in the trust deed.

B. The trustee or beneficiary may file and maintain an action to foreclose a deed of trust at any time before the trust property has been sold under the power of sale. A sale of trust property under the power of sale shall not be held after an action to foreclose the deed of trust has been filed unless the foreclosure action has been dismissed.

C. The trustee or beneficiary may file an action for the appointment of a receiver according to sections 12-1241 and 33-702. The right to appointment of a receiver shall be independent of and may precede the exercise of any other right or remedy.

D. The power of sale of trust property conferred upon the trustee shall not be exercised before the ninety-first day after the date of the recording of the notice of the sale. The sale shall not be set for a Saturday or legal holiday. The trustee may schedule more than one sale for the same date, time and place.

E. The trustee need only be joined as a party in legal actions pertaining to a breach of the trustee’s obligation under this chapter or under the deed of trust. Any order of the court entered against the beneficiary is binding upon the trustee with respect to any actions that the trustee is authorized to take by the trust deed or by this chapter. If the trustee is joined as a party in any other action, the trustee is entitled to be immediately dismissed and to recover costs and reasonable attorney fees from the person joining the trustee.

33-808. Notice of trustee’s sale

A. The trustee shall give written notice of the time and place of sale legally describing the trust property to be sold by each of the following methods:

1. Recording a notice in the office of the recorder of each county where the trust property is situated.

2. Giving notice as provided in section 33-809 to the extent applicable.

3. Posting a copy of the notice of sale, at least twenty days before the date of sale in some conspicuous place on the trust property to be sold, if posting can be accomplished without a breach of the peace. If access to the trust property is denied because a common entrance to the property is restricted by a limited access gate or similar impediment, the property shall be posted by posting notice at that gate or impediment. Notice shall also be posted at one of the places provided for posting public notices at any building that serves as a location of the superior court in the county where the trust property is to be sold. Posting is deemed completed on the date the trust property is posted. The posting of notice at the superior court location is deemed a ministerial act.

4. Publication of the notice of sale in a newspaper of general circulation in each county in which the trust property to be sold is situated. The notice of sale shall be published at least once a week for four consecutive weeks. The last date of publication shall not be less than ten days prior to the date of sale. Publication is deemed completed on the date of the first of the four publications of the notice of sale pursuant to this paragraph.

B. The sale shall be held at the time and place designated in the notice of sale on a day other than a Saturday or legal holiday between 9:00 a.m. and 5:00 p.m. mountain standard time at a specified place on the trust property, at a specified place at any building that serves as a location of the superior court or at a specified place at a place of business of the trustee, in any county in which part of the trust property to be sold is situated.

C. The notice of sale shall contain:

1. The date, time and place of the sale. The date, time and place shall be set pursuant to section 33-807, subsection D. The date shall be no sooner than the ninety-first day after the date that the notice of sale was recorded.

2. The street address, if any, or identifiable location as well as the legal description of the trust property.

3. The county assessor’s tax parcel number for the trust property or the tax parcel number of a larger parcel of which the trust property is a part.

4. The original principal balance as shown on the deed of trust. If the amount is not shown on the deed of trust, it shall be listed as “unspecified”.

5. The names and addresses, as of the date the notice of sale is recorded, of the beneficiary and the trustee, the name and address of the original trustor as stated in the deed of trust, the signature of the trustee and the basis for the trustee’s qualification pursuant to section 33-803, subsection A, including an express statement of the paragraph under subsection A on which the qualification is based. The address of the beneficiary shall not be in care of the trustee.

6. The telephone number of the trustee.

7. The name of the state or federal licensing or regulatory body or controlling agency of the trustee as prescribed by section 33-803, subsection A.

D. The notice of sale shall be sufficient if made in substantially the following form:

Notice of Trustee’s Sale

The following legally described trust property will be sold, pursuant to the power of sale under that certain trust deed recorded in docket or book _______________________ at page __________ records of ______________ county, Arizona, at public auction to the highest bidder at (specific place of sale as permitted by law) _______________, in _______________ county, in or near _______________, Arizona, on ________, ____, at ___________ o’clock ___m. of said day:

(street address, if any, or identifiable

location of trust property)

(legal description of trust property)

Tax parcel number _______________

Original principal balance $________________________

Name and address of beneficiary ______________________________



Name and address of original trustor _________________________



Name, address and telephone number of trustee ________________



Signature of trustee _____________________________

Manner of trustee qualification ___________________________

Name of trustee’s regulator _______________________________

Dated this _____________ day of ______________, ____.


E. Any error or omission in the information required by subsection C or D of this section, other than an error in the legal description of the trust property or an error in the date, time or place of sale, shall not invalidate a trustee’s sale. Any error in the legal description of the trust property shall not invalidate a trustee’s sale if considered as a whole the information provided is sufficient to identify the trust property being sold. If there is an error or omission in the legal description so that the trust property cannot be identified, or if there is an error in the date, time or place of sale, the trustee shall record a cancellation of notice of sale. The trustee or any person furnishing information to the trustee shall not be subject to liability for any error or omission in the information required by subsection C of this section except for the wilful and intentional failure to provide such information. This subsection does not apply to claims made by an insured under any policy of title insurance.

F. The notice of trustee sale may not be rerecorded for any reason. This subsection does not prohibit the recording of a new or subsequent notice of sale regarding the same property.

33-820. Trustee’s right to rely; attorney’s right to act for trustee and beneficiary

A. In carrying out his duties under the provisions of this chapter or any deed of trust, a trustee, shall when acting in good faith, have the absolute right to rely upon any written direction or information furnished to him by the beneficiary.

B. An attorney for the beneficiary shall also be qualified to act as attorney for the trustee or to be the trustee.

Pre-foreclosure Period

Court foreclosures begin when the lender files for foreclosure in court and records a notice of the pending lawsuit (Lis Pendens). The court filing includes the debt and default amount. The borrower and any junior lien holders are notified either in person or by publication. If the borrower does not respond to the court action, the court can rule against them and set the amount owed to the lender. The county clerk then directs the county sheriff to conduct a sale of the property to recover the amount owed.

An out-of-court foreclosure sale may occur if a clause in the trust deed permits the lender to sell the property if a borrower defaults. To start the foreclosure, the trustee records a notice of sale, and the sale occurs at least three months after the notice is recorded. Until 5:00 p.m. the day before the sale, the borrower or any junior lien holders may stop the foreclosure by paying the default amount, fees, and costs.

Notice of Sale / Auction

For court foreclosures, the sheriff conducts the sheriff’s sale about 45 days after the county clerk directs the sale. It is a public auction, and anyone may bid.  The bid price must be paid to the sheriff by 5:00 p.m. the day after the sheriff’s sale. After the sale, a certificate of sale is issued.  If the property is not abandoned, the redemption period is six months from the sale date. If the borrower does not redeem, any secondary lenders may do so within a specified time. To redeem the property, the total amount owed plus fees and costs must be paid. If no one redeems the property, the sheriff transfers ownership to the winning bidder.

For out-of-court trustee’s sales, the notice of sale contains a property description, and the date, time and place of the sale. The notice is recorded, and the trustee mails the notice to all affected parties at least three months before the sale date. The notice appears in a local newspaper once a week for four weeks, with the last notice published no less than 10 days before the sale date. At least 20 days before the sale, the notice is posted on the property and the county courthouse. Starting the day before the sale and up to the sale, the trustee must provide the opening bid of the sale to anyone who asks or the sale may have to be postponed.

The trustee or the trustee’s agent conducts the sale at the property, the courthouse, or the trustee’s office.  All bidders must provide a refundable $10,000 deposit in order to bid; the trustee keeps the deposit of the winning bidder. The sale can be postponed up to 90 days by announcement at the originally scheduled sale. The winning bidder has until 5:00 p.m. the next day to pay the full bid price, after which the trustee transfer ownership of the property within seven days. The proceeds of the sale are paid to the primary lender, then to any secondary lenders. There is no right of redemption for the borrower after an out-of-court foreclosure sale.

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