In today’s economy, there are many residential and commercial real estate properties that are in foreclosure. The phrase “in foreclosure” is a general phrase which typically means that a borrower is about to lose his property to the lender through a nonjudicial foreclosure. A nonjudicial foreclosure is a mechanism allowed by Utah statute whereby title to the property used to secure a loan can be transferred to a lender without assistance from a court. A lender can also bring a judicial foreclosure action, which is started like any other lawsuit by suing the borrower and seeking as a remedy in court the sale of the property for the amount of the judgment entered against the borrower. This article will not discuss the differences between the two foreclosure methods, nor will it discuss judicial foreclosures. Rather, the rights and remedies set forth herein will be about a nonjudicial foreclosure. The lender’s perspective is discussed in a separate article.
When a person has borrowed money to purchase property, build a structure, or add on to an existing building, the lender generally requires that the borrower execute not only a promissory note promising to pay back the money, but a trust deed as well, putting the title to the property in trust to be held for the benefit of the lender in case of nonpayment. A qualified trustee is appointed in the trust deed and is responsible to carry out the terms in case of nonpayment by the borrower. In a typical transaction, the trust deed requires the borrower to make its monthly payments, keep taxes current, and perform upkeep and maintenance on the property as might be needed under the circumstances. As long as the borrower is current in all of its payments and obligations, the fact that the trust deed exists is of no particular consequence. It is important to remember that the borrower is the owner of the real property and has all rights and obligations of ownership. By signing the trust deed, the borrower has simply placed some restrictions to its property rights in relation to the transfer of title. The lender does not retain any ownership rights in the property, but is limited to exercising only those rights allowed in the trust deed to the extent permitted by Utah law.
If the borrower is late in its payment or defaults on other obligations, the lender has the right to start the foreclosure process by “notice of default” with the county recorder and sending a copy to the borrower. This triggers a 90-day time period wherein, if the borrower can pay all of the arrears current, together with any costs and fees associated with the notice of default, the lender must be reinstate the borrower in the loan and void the notice of default. If within 90 days the borrower cannot bring the arrearage current, the lender has the right to have the trustee sell the property. If the trust deed covers more than one parcel of real property, the borrower can appear at the sale and demand that the parcels be sold separately and in a particular order. The trustee has a duty to follow the instruction of the borrower as to which parcel to sell first to satisfy the debt.
The borrower’s rights do not end when the 90 days has run. Prior to the sale date, the borrower still has the contractual right to pay off the promissory note in full, including and fees and penalties, which the lender must accept. The lender does not have the right to refuse the full payment in order to get a property that may now have a high equity value.
This article is not intended to be legal advice. Receipt of this information does not create an attorney-client relationship.
Tags: borrower, foreclosure, judicial, nonjudicial, remedies