what is a foreclosure trustee

Foreclosure Trustee | What is a Foreclosure Trustee

New York is a judicial foreclosure state; a lender must go through the courts to foreclose on a property.  However, in certain circumstances, the judicial process can be avoided if certain circumstances are met.  This is where the role of the foreclosure trustee sometimes comes in, and where it may benefit you to consult the services of an attorney at the Law Office of Yuriy Moshes P.C. if you’re a borrower in New York.

What is a Foreclosure Trustee

Who is the trustee in a foreclosure?  They are a third-party person in a foreclosure where the courts are not involved.  A non-judicial foreclosure occurs when a borrower pre authorizes the sale of a property to satisfy any remaining balance.  This type of clause is written into the mortgage or deed of trust.  Non-judicial foreclosures are limited to commercial properties with a few exceptions.

The Role of a Trustee in a Foreclosure

A trustee in foreclosure supervises the sale of the property in a non-judicial foreclosure.  Their specific duties are noted in more detail below.

The Neutrality of Foreclosure Trustees

Not many states have laws on the books that address and regulate foreclosure trustee neutrality.  In theory, they are supposed to provide impartial oversight of the foreclosure.  However, often they’re people hand picked by the lender and thereby are on the lender’s side when foreclosure is at hand.  They have incentive not to take the borrower’s side.  This is where a lawyer can help in the foreclosure proceedings.  Please fill out the form to talk with Gennady Litvin or one of our foreclosure attorneys at the Moshes Law firm if you have to deal with a foreclosure trustee.

Foreclosure Trustee Services

A foreclosure trustee’s duties are generally limited in scope:  

  • Manage the foreclosure process
  • Authorize the sale of a property if a borrower defaults

However, they are not obligated to determine the validity of whether a loan obligation  has been transferred from the borrower to another party.

Notice of Default (NOD)

A notice of default is issued when the borrower gets behind on payments.  The trustee lets the county’s recorder know about the default.  The NOD lists details including, but not limited to:

  1. the borrower(s)’s identity
  2. Property and default details
  3. Deadline to resolve the defaulted loan
  4. Note of public sale if nothing is resolved

Notice of Trustee’s Sale (NOS)

If the default is still open after 35 days, the trustee will then put out formal notice to sell the property.  The NOS will have details of the sale. It will be published in a public forum like a newspaper or with the county recorder or even on the property itself.

Trustee Sale (Auction)

After the property is foreclosed, a trustee auction is scheduled.  The property is given over to the highest bidder at the auction. Afterward, ownership is then transferred to that bidder.

The Trustee’s Deed

The trustee’s deed is a document drawn up after the conclusion of the public auction.  The deed documenting the change in ownership becomes a matter of public record in the county the sale occurred.  The document is also sometimes referred to as a trustee’s deed upon sale.

Foreclosure Trustee Sale

As mentioned previously, auction is the means of divesting a defaulted property. Public notice is put out about the pending sale.  The property goes to the buyer offering the most money.  The lender gets the property if it remains unsold after auction.

Trustee Sale vs Foreclosure

What is the difference between trustee sale and foreclosure?  There really is not any difference.  A trustee sale or public auction is the next to the last step in the process of resolving a defaulted property.  

How Does It Work

The trustee sale puts the defaulted property up for grabs.  A trustee’s deed is then recorded, giving the property to the new owner, the highest bidder.  The property reverts back to the lender if it fails to sell.

What is Substitution of Trustee in Foreclosure Process

A trustee is named in a deed of trust, but it is not the same person who governs the foreclosure process.  The lender chooses the latter trustee for the foreclosure. Previously it was mentioned there may be an implied bias on part of the trustee since they are typically chosen by the lender.  If you feel the trustee is not living up to their expected obligations and duty to be impartial, you can attempt to delay the foreclosure process until a proper trustee is brought on board. 

Getting Help From Foreclosure Attorney

 You have the right to a fair and impartial handling of your affairs. An proficient 

foreclosure attorney can help you navigate the process of a foreclosure and dealing with a foreclosure trustee.   Let us help you by filling out the form for a free consultation with a foreclosure attorney at the Law Office of Yuriy Moshes P.C.

FAQ section

What is the difference between a trustee sale and a foreclosure?

A trustee sale is one step in the foreclosure process.  The property is typically sold at auction and ownership transferred to a new party via a trustee’s deed upon sale (or trustee’s deed).  If the property isn’t sold, it falls on the lender to deal with the foreclosed property.

Can trustees sell property without all beneficiaries approving?

A trustee can attempt to sell the property, but if the borrower feels the matter isn’t being handled fairly and impartially, they can seek a substitution of trustee.

Do banks want to foreclose?

Banks want to do what they can to resolve defaulted properties without resorting to foreclosure.  Often in foreclosure of commercial properties, the property sells at a price lower than fair market value and thereby is a financial loss for the bank.

Do you get money back for foreclosure?

No, properties are often sold at auction for less than what they are worth.  You do not get any money because any money from the sale goes to resolve any open debt on the property.  So it benefits the lender, and more importantly you, to resolve foreclosures before they hit the auction block.

How soon after foreclosure is eviction?

Eviction deadlines vary upon the individual circumstances and It varies from state to state.  However, recent federal and state laws have extended the deadline for eviction moratoriums.  The CDC recently extended the eviction moratorium to June 30, 2021.  Governor Andrew Cuomo extended a law forbidding residential and commercial evictions to May 1, 2021.

Leave a Reply