Legal Question in Real Estate Law in California

Technically, I suppose, what you inherited is a promissory note which is secured by a deed of trust on some kind of real property.

The first thing I would do is learn something about the note itself, the collateral, the borrower, and the market for the collateral.

Among the things I would want to know, if I were in your position, are: Is your trust deed in first position, second, or further down in the pecking order? When is it due? What is the market value of the collateral? Is the collateral (piece of real property) a residence? Is it occupied by the borrower? What kind of physical condition is it in? Is it covered by paid-up fire/hazard/public liability insurance? Are the taxes paid? What is the borrower's situation - employed, creditworthy and responsible? Any drug activity going on? Is there a homestead recorded? Is your loan secured by adequate equity, or "under water," in the event you foreclosed today? If this is a second or more-junior loan, are the senior loans current? Who holds them? Is your borrower a relative, family friend, or a stranger? If the borrower made an application for this loan, who has the original and what does it say? Is there title insurance protecting the lender and his/her successors?

You and your sister are now in the loan-servicing business, whether you intended to be or not, and whether this turns out to be happy and profitable or not may depend upon getting acquainted with your new asset and learning how best to assure you eventually get the interest and principal to which you're entitled.

At one time there was a market for "seasoned" notes/trust deeds, but I doubt that you'll be better off selling your mildly-in-default note in whatever's left of the market today, but that is or was an alternative you should know about.

A lawyer with real-estate or even better trust deed experience could probably provide answers to some of the above questions for a few hundred dollars' research, but I'd try to find one in Palmdale who knows that market and who also makes regular trips to the County Recorder's office (that's in L.A. County, right?) so you don't have to pay for special trips.

Mr. Whipple is trying to make this far more complicated than it is. I have 22 years of real estate and trust deed experience, including over five years as a vice president and associate general counsel for the parent company of Fidelity National Title and Chicago Title. The one thing Mr. Whipple is correct about is you are now in the loan business and you have a loan that is in default. All you need to know is whether your trust deed is adequately secured or if the value of the property is less than the total of your loan plus any senior loans, and whether your loan was used to purchase the property, or was placed later. This is relevant because you need to know if you can pursue the borrower personally if there is not enough equity. I would be happy to give you a few minutes of free consultation about your situation. I doubt you will need my services or that of any attorney after we talk, but if you do I'd be happy to help or refer you.