Legal Question in Real Estate Law in California

They do not have to have the original deed of trust, but if the original deed of trust was never even recorded and they don't have the original, they will have to go to court and establish a constructive lien and foreclose that.

I'm not sure that Mr. McCormick is correct.

As a preliminary matter, the failure of the beneficiary to record the deed of trust does not render the original deed of trust invalid, assuming that the lender/ beneficiary still has the original. �An unrecorded instrument is valid as between the parties thereto and those who have notice thereof.� (Civ. Code, � 1217.)

Failure of a beneficiary to record a deed of trust, however, will create problems with priority. A subsequently recorded deed of trust in favor of another lender, or other lien, would have priority over the unrecorded deed of trust, unless the unrecorded deed of trust was for purchase money. A purchase money deed of trust always has priority over other liens. (Civ. Code, � 2898.) This priority would remain, even if the other liens were recorded first. (DMC, Inc. v. Downey Savings & Loan Assn. (4th Dist. 2002) 99 Cal.App.4th 190.)

It is hard for me to fathom how a trustee would be able to commence a nonjudicial foreclosure without a recorded deed of trust, notwithstanding the above authorities. My reasoning is that to commence a nonjudicial foreclosure by way of trustee�s sale, the trustee must record a notice of default. The notice of default shall include a statement identifying the deed of trust by giving the book and page or instrument number, if applicable, where the deed of trust is recorded. (Civ. Code, � 2924 subd. (a)(1)(A).)

Possession of the deed of trust, however, is not required to initiate a nonjudicial foreclosure. As a general rule, the foreclosure process begins with a demand on the trustee by the beneficiary that the trustee commence the foreclosure. The trustee usually requires that the beneficiary deliver to the trustee the original note, the deed of trust, any assignment of the note, a �statement of condition� that describes the terms of the note or secured contract, the unpaid principal balance, the defaults by the trustor, and a written request that the trustee commence foreclosure. It is not critical, however, that the beneficiary actually physically deliver these documents to the trustee to lawfully commence a nonjudicial foreclosure. Manual delivery is not necessary, symbolic delivery has been held to be sufficient. �As to the first alleged irregularity, it is our conclusion that manual delivery of the note and deed of trust was not necessary--symbolic delivery was sufficient.� (California Trust. Co. v. Smead Inv. Co. (2nd Dist. 1935) 6 Cal.App.2d 432, 434-435.)