In a trust deed or mortgage investment, foreclosure is the legal process by which the lender takes possession of the property to recover the outstanding balance of the loan. The foreclosure process in a trust deed investment is typically faster and less expensive than in a mortgage because it is a non-judicial process.

If the borrower is delinquent in their payments, the lender or trustee can initiate the foreclosure process by filing a notice of default with the county recorder’s office. The borrower will then have a certain period of time to cure the default by paying the outstanding balance, including any accrued default interest, late fees and penalties. If the borrower fails to cure the default, the lender can proceed with a notice of sale, which sets a date and time for the trustee to auction the property.

At the trustee sale, the property is sold to the highest bidder, typically for cash or a cashier’s check. If the property is sold for more than the outstanding balance of the loan, the excess funds will be distributed to any junior lienholders or the borrower. If the property is sold for less than the outstanding balance, the lender may pursue a deficiency judgment against the borrower for the remaining balance.