In a deed of trust, what happens if the debtor defaults?

In a deed of trust, when a debtor defaults on the loan, the trustee has the authority to sell the property. The purpose of a deed of trust is to secure a loan with the property itself as collateral. In this arrangement, if the debtor fails to repay the loan as agreed, the lender has the right to initiate a foreclosure process through the trustee.

The trustee acts on behalf of the lender and is responsible for administering the terms of the deed of trust. If the debt remains unpaid and the requisite legal processes are followed, the trustee can proceed with the sale of the property, typically through a public auction. This sale is intended to recoup the outstanding loan amount or to fulfill the debt obligation to the lender, helping mitigate financial losses.

This process is a protective measure for lenders in real estate transactions, allowing them to recover their investment when borrowers cannot meet their payments. Thus, the action taken by the trustee directly ties to their fiduciary duty to manage the asset on behalf of the lender in that scenario.