Legal Question in Real Estate Law in California

Re: deed in lieu

Gosh, I'd say that's a question for the lender. It's a matter of their business judgment.

By the way, there has been an explosion of questions on LawGuru in the last couple hours about attoreny-placed trust deed liens. In my humble opinion, trust deeds can only be created by the owner (or, perhaps, a co-owner) of the property. Third parties like attorneys with unpaid bills can obtain liens upon client real property, to my knowledge, in only three ways: (1) obtain a judgment after winning a suit against the (former) client and asserting a judgment lien; (2) using the special law allowing a divorcing spouse to pledge community property in order to finance legal assistance; or (3) when the client VOLUNTARILY executes a note and deed of trust. I know of no way that a "deed of trust" lien can be created without the voluntary action of the owner/trustor.

Another remote possibility is that the lawyer may have purchased the note from another lender; in that case, the security (the deed of trust) follows the obligation (the note), but for a lawyer to purchase a note executed by a client would be unusual and probably an ethical breach.

Re: deed in lieu

Lenders rarely accept deeds in lieu of foreclosure, becasue when they do, they get the property back with all the "warts" on it. By that, I mean they would get it encumbered by any other deeds of trust, judgment liens, etc. In addition the grantor of a deed in lieu has a right to redeem the property and "change his mind" after deeding it back to the lender, so the lender cannot get a policy of title insurance for at least a year, and thus the lender cannot resell the property right away. The lender is far better off, in such circumstances, in carrying out a trustee's sale because that will "clean up" the property and extinguish anything junior to theier interest.