TX 18.28 Soldiers’ And Sailors’ Civil Relief Act
SLS2010023 Insuring at or after Mortgage or Deed of Trust Foreclosure
SLS2011001 Class Actions on Foreclosures
SLS2011002 Service Member Foreclosure Protection Extended
TX000008 Recent Legislation
TX000011 Maintenance Liens, Foreclosures
TX000069 Procedural Rule P-53 Rebates and Discounts Prohibited
Deed of Trust/Power of
A deed of trust containing a "power of sale" is the primary mortgage document utilized in
Generally, a title arising out of a nonjudicial foreclosure may be insured upon satisfaction of the following requirements:
The nonjudicial foreclosure was conducted in compliance with the provisions of the deed of trust and Property Code Sec. 51.002.
The power of sale vested in a trustee under a deed of trust exists by virtue of the private contractual relationship between the parties and the requirements therein for foreclosure must be satisfied. However, Section 51.002 of the Property Code establishes the minimum level of requirements for exercise of a power of sale.
The requirements delineated in Section 51.002 are:
- If the property is the debtor's residence, the holder of tfhe debt must give the debtor (i) written notice of default by certified mail and (ii) at least 20 days to cure the default before notice of sale can be given. (Property Code Sec. 51.002(d)).
- Notice of the sale must be given at least 21 days before the date of the sale by:
- Posting at the courthouse door of each county in which the property is located, a written notice designating the county in which the property will be sold. (Property Code Sec. 51.02(b)(1)).
- Filing in the office of the county clerk of each county in which the property is located, a copy of the posted notice. (Property Code Sec. 51.002 (b)(2)).
- Serving written notice of the sale by certified mail on each debtor who, according to the records of the holder of the debt is obligated to pay the debt. (Property Code Sec. 51.002(b)(3)).
Service of notice is complete when the notice is deposited in the
mail, postage prepaid, and addressed to the debtor at debtor's last known address as shown by the records of the holder of the debt. United States
Service of notice is to be given by the holder of the debt. (Property Code Sec. 51.002(e)).
- The sale must be a public sale at auction held between 10:00 a.m. and 4:00 p.m. of the first Tuesday of the month. (Property Code Sec. 51.002(a)).
- The sale must take place at the county courthouse where the property is located.
If the property is located in more than one county, the sale may be made in any county where the property is located. (Property Code Sec. 51.002(a)).
- The sale must take place in the area at the courthouse designated by the county commissioner's court.
If no area is designated by the commissioner's court, the sale must take place in the area of the courthouse specified in the notice of sale. (Property Code Sec. 51.002(a)).
- The notice of the sale must state the earliest time at which the sale will begin. (Property Code Sec. 51.002(c)).
- The sale must begin at the time specified in the notice of sale or not later than 3 hours after that time. (Property Code Sec. 51.002(c)).
Notice to Whom?
Under Section 51.002 of the Property Code and current case law, only the debtor/debtors obligated to pay the debt must be served with written notice of the sale.
In addition to the maker of a note, guarantors and anyone who has assumed the mortgage and so informs the mortgagee of said assumption must also be served with written notice of the sale.
Computation; 20-Day Notice
The entire calendar day on which the 20-day notice to cure is given (regardless of the time of day at which the notice is given) is included in computing the 20-day cure period, and the entire calendar day on which the notice of foreclosure sale is given is excluded.
Computation; 21-Day Notice
The day on which the 21-day notice of foreclosure sale is given (regardless of the time of day at which the notice is given) is included in computing the 21-day notice of foreclosure sale period, and the entire calendar day of the foreclosure sale is excluded.
Recitals in Trustee's Deed or Affidavit
Unless the policy issuing agent has actual knowledge of some problem with the sale, it may rely on recitals in the trustee's deed (after 4 years) or in an affidavit (current transaction) from the trustee or substitute trustee which verifies the foreclosure sale was conducted in compliance with Sec. 51.002. The recitals should specifically outline the requirements of Section 51.002 which have been complied with and provide specific information rather than general representations.
Since recitals contained in a trustee's or substitute trustee's deed constitute prima facie evidence that the terms of the deed of trust were fulfilled, the Company will accept the recitals in the trustee's or substitute trustee's deed in lieu of the affidavit noted above. However, the requirements for specifics in the affidavit also apply to the recitals in the trustee's or substitute trustee's deed.
The nonjudicial foreclosure was conducted in compliance with the terms of the deed of trust.
A trustee's power to sell a mortgagor's property is derived solely from the deed of trust and the powers conferred on the trustee must be strictly followed.
Therefore, if the deed of trust power of sale provisions establish requirements in addition to those set forth under Section 51.002 of the Property Code, these additional requirements must be complied with.
The policy issuing agent may rely on an affidavit from the trustee or substitute trustee or the recitals contained in the trustee's or substitute trustee's deed which specifically verify that the terms and conditions of the deed of trust have been complied with.
The nonjudicial foreclosure was conducted by the trustee or a properly appointed substitute trustee.
Unless authorized by the deed of trust, the power of sale cannot be delegated to another.
A foreclosure sale conducted by anyone other than the designated trustee or authorized substitute trustee is void.
Any failure to comply with the provisions of the deed of trust pertaining to the appointment of a substitute trustee renders the appointment void.
However, a trustee or substitute trustee may delegate the duties of signing and posting the notice because these acts are ministerial in character.
Appointment of Substitute Trustee
Unless expressly required by the deed of trust, there is no requirement that the appointment of a substitute trustee be recorded.
However, if the appointment of substitute trustee is not recorded, the policy issuing agent should require a copy of the appointment for review and recording.
If the deed of trust requires that the appointment of substitute trustee be recorded, any notice of sale by the substitute trustee will have no force or effect until the appointment is recorded.
If the appointment of substitute trustee is required to be recorded by the deed of trust and the appointment is made before the rendition of the 21-day notices requires by Section 51.002(b) of the Property Code, the appointment must be recorded at least 21 days prior to the foreclosure sale in order to validate said sale.
Effective January 1, 2004, a mortgage servicer can administer a foreclosure for the mortgagee under Sec. 51.0025 Prop. Code. The mortgage servicer can appoint a substitute trustee (51.0075). You may assume that the foreclosure is valid if it is a one to four family property and the mortgagor has abandoned the property.
If the underlying note is endorsed by the collateral assignor (beneficiary of the deed of trust) to a collateral assignee, the collateral assignee is the legal holder of the note and is therefore authorized to appoint a substitute trustee.
If, however, the underlying is not endorsed and the deed of trust has been collaterally assigned to another and the collateral assignment document indicates the assignment is for collateral purposes rather than an outright assignment, the collateral assignor (beneficiary of the deed of trust) remains the holder of the underlying note and is the one authorized to appoint a substitute trustee.
It is unclear what the result would be in the situation where the underlying note is not endorsed but an outright assignment of the note and lien to another has been executed rather than a collateral assignment, even though the assignment was in fact for collateral purposes.
In collateral assignment situations, the Company may require that the appointment of substitute trustee be executed by both the collateral assignor and collateral assignee.
The debtor is not in possession
The policy issuing agent may rely upon
an inspection by the policy issuing agent which verifies the debtor has vacated the property, or
a non-possession recital in the trustee's or substitute trustee's affidavit, or
a non-possession recital delineated in the trustee's or substitute trustee's deed.
The debtor was alive at the time of the nonjudicial foreclosure
Intestacy/Dependent Administration - effective on or after January 1, 1996 (Probate Code Sec. 306)
A nonjudicial foreclosure is allowed during the pendency of a dependent administration if:
The personal representative and lienholders are personally served,
The court authorizes the foreclosure, and
The claim of a lien has been allowed, approved and fixed.
The court may establish a minimum price.
A confirmation order after the sale is not required.
Underwriting Standard: To insure out of such a nonjudicial foreclosure sale:
a)Verify that all other requirements for a nonjudicial foreclosure are satisfied,
b)Verify that the personal representative, any other owner, and all lienholders are personally served, and
c)Verify the bid complied with any court ordered minimum price.
Intestacy/Dependent Administration - Prior to January 1, 1996
A nonjudicial foreclosure exercised during the pendency of a dependent administration is void because of the suspension of the power of sale by the opening of administration.
A nonjudicial foreclosure conducted after the death of the debtor is voidable if a dependent administration is opened within 4 years of the death of the debtor.
In these situations, require
that the lender present its claim in the probate court and secure a sale of the property under Probate Code Sec. 338,
a deed from all of the heirs, or
an exception in the policy on Schedule B for the possibility of the foreclosure being voided.
If more than 4 years has elapsed since the death of the debtor with no administration having been filed, a nonjudicial foreclosure can be pursued.
If more than 4 years has passed since the death of the debtor and no dependent administration has been opened, then a foreclosure sale conducted during the 4 years will pass title via the recorded trustee's deed.
The power of sale in a deed of trust may be exercised after the death of the debtor if there is a pending independent administration. The policy issuing agent should review the notice of sale to confirm that the independent executor or executrix was notified.
The policy issuing agent should require either a recital in the trustee's or substitute trustee's affidavit or deed which indicates the debtor was alive at the time of the nonjudicial foreclosure or the facts of an intestacy or testacy situation that allow foreclosure. Such recitals should be supported by complete documentation.
The debtor was not in the military service at the time of the foreclosure.
Under the Service Members Civil Relief Act of 2003, 50 U.S.C. Appendix Sec. 501, et seq. (1981), no sale, foreclosure or seizure of property for non-payment is valid if made during the period of military service or within 3 months after the end of the military service, without a written agreement between the parties or upon the entry of a court order. The SCRA commences no later than the date a person enters active service or for a Reserve Member on the date they receive active duty orders.
When appropriate, this requirement is satisfied by
a recital in the trustee's or substitute trustee's affidavit or a recital in the trustee's or substitute trustee's deed which indicates the debtor was not in the military at the time of the nonjudicial foreclosure.
a written agreement between the parties, or
a court order.
A proper and accurate trustee's or substitute trustee's deed to the purchaser was recorded in the deed records of the county where the real property is located.
Upon a default of a loan secured by a deed of trust on real property, the lender can foreclose its lien either by instituting a judicial foreclosure proceeding or by a valid exercise of the power of sale contained in the deed of trust.
However, the lender cannot resort to both proceedings and must make an election or remedies.
In addition to a deed of trust, when the purchase of real property is financed by the seller or a third party lender, a vendor's lien is retained by the seller in the deed to secure the unpaid purchase money for the real property.
If the purchase is financed by a third party lender, the vendor's lien is assigned by the seller to the third party lender.
A vendor's lien exists separate and apart from a deed of trust lien and may be enforced by a suit to foreclose the lien.
Even if an express vendor's lien is not reserved in the deed, it arises by operation of law to secure the payment of purchase money and may be foreclosed in a judicial foreclosure proceeding.
Bankruptcy - The Effect Of
The filing of a bankruptcy petition by the debtor operates as an automatic stay against the commencement or continuation of a foreclosure proceeding. 11 USCS §362 (1985).
Lifting the Automatic Stay
If the title search to a property reflects a recent foreclosure consummated after the filing of a bankruptcy petition by the debtor, the policy issuing agent should require a certified copy of an order from the bankruptcy court lifting the automatic stay. Said order must be obtained prior to the foreclosure and recorded.
Annulling the Automatic Stay
If a foreclosure has been initiated and completed subsequent to the filing of a bankruptcy petition by the debtor in violation of the automatic stay, it is possible to validate the foreclosure.
An order from the bankruptcy court which "annuls "the automatic stay has the effect of invalidating the stay thereby rendering the subsequent foreclosure sale void.
However, a subsequent bankruptcy order which merely "lifts "or "terminates? the stay is not sufficient to validate a foreclosure conducted in violation of the automatic stay. The subsequent bankruptcy order must contain specific language which "annuls "the say in order to validate foreclosure.
Therefore, the policy issuing agent should require a certified copy of a bankruptcy order annulling the stay in order to insure a title arising out of a foreclosure which was otherwise conducted in violation of the automatic stay. Said order should be recorded.
Abandonment of Debtor's Real Property
The abandonment of property in the bankruptcy by the trustee does not terminate the automatic stay in regard to the abandoned property.
Upon the filing of a bankruptcy petition, property owned by the debtor becomes property of the bankruptcy estate.
The automatic stay applies to property of the bankruptcy estate and property of the debtor.
The abandonment of the property by the trustee merely converts the property into property of the debtor and the automatic stay is still in existence against property of the debtor.
Therefore, notwithstanding the abandonment of the property by the bankruptcy trustee, it is a requirement that an order from the court lifting the automatic stay be obtained prior to a foreclosure.
A nonjudicial foreclosure of a senior lien, as well as the judicial foreclosure of a senior lien in which all parties have been joined, extinguishes inferior liens and other encumbrances.
If the policy issuing agent is satisfied that the nonjudicial or judicial foreclosure constituted a valid foreclosure of a senior lien, inferior liens and encumbrances need not be shown as exceptions to title.
A valid sale under foreclosure gives the purchaser the right to either terminate a lease agreement created subsequent to the foreclosed lien, or to continue it in force with the consent of the tenant.
The foreclosure sale does not terminate the inferior lease agreement as a matter of law.
The policy issuing agent should not assume the foreclosure of a superior lien extinguished an inferior lease agreement.
The policy issuing agent should require some evidence, such as a recordable affidavit from the purchaser, which verifies the purchaser did not continue to recognize the lease, did not allow the tenant to remain in possession after the foreclosure, and did not accept rentals after the foreclosure, etc..
Federal Tax Liens
If a lien senior to the IRS lien is foreclosed (or a senior land sale contract is forfeited), the federal tax lien may be extinguished, but only if the foreclosure complies with procedures set forth in federal laws.
In a judicial foreclosure, a junior tax lien is not affected if the U.S. was not made a party to the action.
If the U.S. is named as a defendant and properly served, then it has the right to redeem.
The redemption period is 120 days or it may be longer if allowed by state law.
Even if the U.S. is not made a party, it may assert its lien against the proceeds of a judicial sale prior to an order for their distribution, although only to the extent of its priority.
In a nonjudicial foreclosure, the federal tax lien is not divested unless the IRS is given notice of the sale.
Where authorized by state law, forfeitures of land sale contracts are deemed to be nonjudicial foreclosure sales. (26 USC 7425(b)(4)).
The IRS must be given notice as long as its notice of lien was recorded more than 30 days before the date of sale (or of a postponed sale). See discussion of this point in Sec. 6.08 Federal Tax Liens.
The government's consent to a nonjudicial sale free and clear does not cut off its right to redeem.
The requirements of the notice are spelled out in 26 USC 7425(c)(1) and in the Federal Tax Regulations, Code of Federal Regulations, Section 301.7425-1, et seq.:
The notice must be given not less than 25 days prior to sale, in writing, by registered or certified mail, or by personal service, to the District Director for the Internal Revenue District in which the sale is to be conducted, marked for the attention of the Chief, Special Procedures Staff.
The notice must contain the name and address of the person submitting the notice of sale, a copy of each notice of federal tax lien (Form 668) affecting the property to be sold, or prescribed information from the notices, full description of the property to be sold, date, time, place, and terms of proposed sale, and approximate amount of the principal obligation secured by the lien and other expenses such as sale costs, etc..
The District Director is entitled to whatever notice of postponement is required under local law.
If the U.S. is not made a party to a judicial foreclosure or not notified or a nonjudicial foreclosure of a senior lien, its lien is not affected. In such a case, title insurance for purchases at a mortgage foreclosure sale or land contract forfeiture sale must contain an exception for the federal tax lien.
Redemption Rights Of The United States - Judicial Foreclosure
Where a judicial sale of real estate is made to satisfy a lien prior to that of the United States, and the United States has been made a proper party defendant, the United States shall have a right of redemption as follows:
If the U.S. lien does not arise under the internal revenue laws - ONE YEAR.
If the U.S. lien does arise under the internal revenue laws - 120 DAYS OR THE PERIOD ALLOWABLE FOR REDEMPTION UNDER STATE LAW, WHICHEVER IS LONGER.
Redemption Rights Of The United States - Nonjudicial Foreclosure
Where a nonjudicial sale of real estate is made to satisfy a lien prior to that of the United States, and the United States has been given proper and timely notice in accordance with the provisions of Section 7425(b)(1)(2), the United States shall have a right of redemption as follows:
"In the case of a sale of real property to which subsection (b) applies to satisfy a lien prior to that of the United States, the Secretary may redeem such property within the period of 120 days from the date of such sale or the period allowable for redemption under local law, whichever is longer."
Insuring Title During The U.S.'s Period of Redemption
Any commitment or title policy to be issued after a judicial or nonjudicial foreclosure sale, but during the period of redemption in favor of the United States, must contain an appropriate exception in regard to said redemptive rights unless the United States had waived its rights of redemption or consented to the property being sold free and clear of its lien.
The Federal Tax Lien Act of 1966 (26 USC Section 6321, et seq.), among other things, establishes the right of the U.S. to redeem the property within a period of 120 days from the date of a foreclosure.
Waiver of the Right of Redemption
The right of the federal government to redeem property sold at either a judicial or nonjudicial foreclosure sale may be waived by the execution of a proper Certificate of Release, a Certificate of Discharge of the Property, or a Certificate of Nonattachment, which fully describes the property.
For additional information concerning federal tax liens, please refer to Section 6.08 of the Underwriting Manual.
Effective January 1, 2004, the owner of an interest sold at an ad valorem tax sale has 2 years to redeem the mineral interest. Any property with any retained minerals is subject to this right. We require an exception for this right in any policy issued during the 2 years.
FDIC/RTC - "Right of Consent"
An issuing agent does not need to require consent by FDIC or RTC to a mortgage foreclosure where FDIC or RTC, in a receivership capacity or corporate capacity, is the holder of a mortgage as a result of the closure of or failed depository institution.
FDIC/RTC - "Right of Redemption"
Although an inferior lien in favor of any federal agency may be extinguished by the foreclosure of a superior lien, 28 USCS §2410(c) provides that a federal agency has a one year right of redemption following the foreclosure of a superior lien.
The FDIC and RTC have adopted the position that they will not assert a right of redemption in their conservatorship, receivership, or corporate capacity.
This right of redemption does not apply to IRS liens.
The policy issuing agent should not automatically assume mechanic's liens are extinguished by the foreclosure of what appears to be a superior lien.
In the absence of an affidavit of commencement of construction pursuant to Property Code Sec. 51.124, in most recent construction situations, it is difficult to ascertain the exact date the commencement of construction or delivery of materials occurred.
Since the inception of all mechanic's liens relate back to the date of commencement of construction or delivery of materials (Property Code Sec. 53.124), it is risky to assume a mechanic's lien is automatically inferior to a foreclosed lien.
Therefore, in recent construction situations, the Company may require in the absence of clear evidence of the relative priorities, a release or waiver, or an indemnity or cash deposit in order to insure around mechanic's liens which were supposedly extinguished by the foreclosure of the superior lien.
Contact a Texas underwriter with any questions.
Removables (See also discussion under fixtures)
Materials intended to be or incorporated into real property may be removed pursuant to a valid mechanic's lien if the removal would not result in material damage to the land, preexisting improvements, or to the materials themselves removed.
A mechanic's lien securing removables is superior and primes a previously recorded deed of trust.
The policy issuing agent should examine the mechanic's lien and determine whether or not the lien is for materials which would likely be ruled to be removable under Texas law.
Contact a Texas underwriter with any questions.
State Tax Liens
Effective September 1, 2003, 113.006 (b) Tax Code provides that a single tax lien notice covers all state liens. We consider that such liens are barred by limitations 5 years after they are recorded.
Ad valorem taxes are not extinguished by a valid foreclosure regardless of when they arose and continue to be liens on the property until they are paid.
A valid foreclosure of a purchase money lien will extinguish a maintenance lien which has been subordinated to the prior recorded deed of trust.
If the maintenance lien was not subordinated, the purchaser will take the property subject to any maintenance assessment.
Capacity - Incapacitated, Minors
The defense of insanity without a pending guardianship is not a defense to foreclosure.
Once a guardian has been appointed on behalf of either a minor or otherwise incapacitated person, a foreclosure will not be effective without order from the appropriate court.
Property in the hands of a receiver during the pendency of a divorce or other court action may not be foreclosed upon validly without an order of the court where the receivership is pending.
Since court appointed receivers are not required to file a notice of receivership proceedings in the real property records, the policy issuing agent must examine any court proceedings involving the mortgagor to determine if there has been a receiver appointed.
Creditor's Rights Issues (Bankruptcy, Insolvency, Fraudulent Conveyance or Transfer)
If an issuing agent has a creditor's rights issue which arises out of the transaction vesting in the insured the estate or interest insured by the policy, the policy issuing agent may rely on the creditor's rights exclusion in the policy and need not add a special exception.
However, if an issuing agent discovers a creditor's rights issue in a prior deed in the chain of title, the Company may require that a creditor's rights exception, be included in the policy. Such exception may read as follows:
"Consequences of any attack on the estate or interest insured herein under any federal or state law dealing with bankruptcy, insolvency, or creditor's rights."
NOTE: Texas law requires the Texas Insurance Commissioner to prohibit all title insurers from providing creditor’s rights coverage and land located anywhere in the USA.
If the price of the property sold at a nonjudicial foreclosure sale (Sec. 51.002) is less than the unpaid balance of the indebtedness secured by the property, any action to recover the deficiency must be brought within two years of the sale. (Property Code Sec. 51.003).
Deficiencies resulting from a judicial foreclosure are governed by Property Code Sec. 51.004.
Deficiencies arising from foreclosures involving guarantors are governed by Property Code Sec. 51.005.
Foreclosure - A Checklist
If the property being foreclosed is a debtor's residence, has proper written notice been given by
certified mail that the debtor is in default under the deed of trust or contract? __________, and
has the debtor been given at least twenty days to cure the default before the entire debt is due and notice of sale is given? __________
Was notice mailed to all persons obligated on the debt (including prior owners remaining liable on the debt)? __________
Was the Notice mailed at least 21 days before foreclosure (including date of mailing and excluding date of foreclosure? __________
Was Notice posted at least 21 days before foreclosure at the courthouse? ___________
Was Notice filed at least 21 days before foreclosure with the County Clerk's office? ___________
Were separate notices given to each spouse? ___________
Does the notice of sale clearly state that the sale will take place at the county courthouse? __________
Does the notice of sale clearly state that the sale will take place in an area designated by the commissioner's court? __________
If no area has been designated by the commissioner's court, does the notice of sale clearly state a designated area where the sale will take place? __________
Does the notice of sale clearly state the earliest time at which the sale will occur? __________
Death of Owners:
Were the current owners alive at the time of the foreclosure? __________
If not, was there independent administration pending at the time of foreclosure? __________
Was dependent administration pending at the time of foreclosure? __________
If so, the foreclosure may be void.
Have more than 4 years passed since the time of death of said owner? __________
If more than 4 years has passed since such person's death and no administration ever occurred, then the foreclosure would be valid.
Was there a guardianship of the estate of the mortgagor at the time of foreclosure? __________
If so, the foreclosure is void.
Did the Deed of Trust require any additional notices (such as publication in newspaper or additional postings)? __________
If so, were such requirements met? __________
Was the foreclosure requested by the holder of the indebtedness? __________
If there were several participants in the indebtedness, then all must join, if the note had been collaterally assigned, then both the assignor and assignee must join or you must verify whether the note was endorsed.
Was a substitute trust appointed by the holder of the debt? __________
If there were several participants, then all must join if the note was collaterally assigned, and you must verify who the holder was.
Was there a divorce pending at the time of foreclosure? __________
If so, verify no injunction was entered in the Court proceeding and that there was no receivership.
Was there a pending judicial foreclosure at the time of the nonjudicial foreclosure? __________
If so, the nonjudicial foreclosure is void.
Federal Tax Liens -
Was Notice given 25 days in advance of foreclosure to the IRS? __________
If so, there is a right of redemption for 120 days; if not, then the Federal Tax lien remains on the property, and we do not recognize a re-foreclosure of an otherwise regular foreclosure simply to provide the IRS with notice. See discussion under Sec. 6.08.9.
Were there any later "cleaning "liens or "weedcutting "liens? __________
If so, they remain liens against the property and are not cut off by foreclosure.
Are there any later mechanic's lien claims? __________
If so, same should be excepted, although perhaps they can be insured under P-11 and/or P-39.
Are there any later UCC fixture filings? __________
If so, same should be excepted to since they may have priority as to fixtures.
Is a bankruptcy pending against the mortgagor at the time of the foreclosure? __________
If so, had a motion to lift stay been filed more than 30 days before notice of the foreclosure was mailed, filed and posted, without objection to the motion having been filed? __________
If the property had been abandoned or exempted, was there a motion to lift stay, or had the discharge already been granted? __________
Was the property possibly the homestead of the mortgagors (if so, is the lien a valid lien against homestead)? __________
Deed of Trust Foreclosure After Deed in Lieu of Foreclosure (Property Code Sec. 51.006)
Effective August 28, 1995, this statute allows a mortgagee that received a deed in lieu of foreclosure to void that deed because of liens or other encumbrances not disclosed by the mortgagor.
The mortgagee may file an affidavit voiding the deed in lieu of foreclosure within four years after receiving the deed in lieu.
A lender may foreclose its deed of trust whether or not it voids the deed in lieu of foreclosure.
A third party may conclusively rely upon the mortgagee's affidavit stating that the mortgagee has voided the deed as provided in this section.