Legal Question in Real Estate Law in California

As a Michigan native who now lives and practices law in California, I can tell you that the systems of real estate financing and foreclosure are as different as, well, twilight and midnight. Michigan uses true mortgages. In California, we use notes secured by deeds of trust. The deed of trust places the power of sale, in the event of the borrower's default, in the hands of a trustee. A trustee is named in the deed of trust, and the trustee can be changed by the beneficiary at any time by following a statutory procedure. So, the trustee plays the role of the agent the Michigan justice was hypothesizing about. Our system is built around private, out-of-court foreclosures. Michigan's isn't.

The Uniform Commercial Code deals mainly with personal property and fixtures, not real estate.....see section 9109(d)(11). I have never heard of a UCC provision coming up in a routine foreclosure in California.

I know a lot of defaulting borrowers have thought they could stall a trustee's sale if the trustee or the beneficiary could not produce the original note - which frequently they can't. However, I do not know of any instance where failure to produce the note has actually delayed a foreclosure sale. As I write at this moment, I can't recall the provision or provisions of law that allow trustee's sales without production of the note, but I do know that a lender can always put up a bond that guarantees its claim of a right to foreclose will turn out to be valid. There is simply too much evidence against the borrower for a borrower to prevail in court against his lender on a claim that the lender, lacking the original note, is not the one with the right to foreclose upon a default.

Changes (substitutions) of agents (here, trustees) must be recorded and notice thereof given by certified mail. This helps to reduce the possibility of a false trustee carrying out a foreclosure sale. Such a sale would be void; the buyer would get no title, and the holder of the note would be unaffected......the loser would be the buyer at the sham sale.