Trust Deed foreclosure is different than that of a mortgage foreclosure because there are no courts involved. Simply put, most investors refer to trust deed foreclosure as a third party action.
Investors use different terms when dealing with a trust deed foreclosure. The borrower is called the trustor, the lender is called the beneficiary, and the third party representative (the one who is holding the title) is called the trustee. The trustee, who represents the lender or beneficiary, is brought on for the sole purpose of holding the title of the property as a security measure against the debt.
Because there is no court action involved, the trustee has the authority to sell the property for the beneficiary in the event the trustor fails to make his monthly mortgage payments. As with any trust deed foreclosure, first the trustee will issue a Notice of Default (NOD) to the delinquent borrower and records it. Usually the trustor has 90 days to cure the loan and pay all the penalties. Once that time is up, they don’t play Mr. Nice Guy anymore. They will post a notice of sale on the front door of the property, the sale of the property is advertised in the newspaper to attract the biggest investors, and after a 3 week publication, the property is auctioned off on the courthouse steps. The highest bidder walks away with the property.
Obviously, most lenders like the trust deed foreclosure process better, because they don’t have to wait 6 months to even years before they can begin the foreclosure process. Time is money.