National Real Estate Exam (PSI)FinancingEasy
A borrower defaults on a loan secured by a deed of trust that grants the trustee 'power of sale.' Because of this clause, the lender can foreclose without filing a lawsuit. What type of foreclosure process is this?
- AStrict foreclosure
- BDeed in lieu of foreclosure
- CNon-judicial foreclosure
- DJudicial foreclosure
Show answer & explanationAnswer & explanation
Correct answer: C. Non-judicial foreclosure
A deed of trust with a power-of-sale clause allows the trustee to sell the property outside of court if the borrower defaults, which is a non-judicial foreclosure. Judicial foreclosure requires a court proceeding and is typically used with mortgages that lack a power-of-sale clause.
Why the other options are wrong
- A. Strict foreclosure gives the lender title directly without a sale, not the scenario here.
- B. A deed in lieu is a voluntary transfer by the borrower, not a foreclosure sale.
- D. Judicial foreclosure requires going through the courts, which the power-of-sale clause avoids.
Non-Judicial Foreclosure
A foreclosure process carried out by a trustee under a power-of-sale clause in a deed of trust, without court involvement.
- Faster and cheaper than judicial foreclosure
- Requires a deed of trust with power-of-sale language
- Trustee conducts the public sale
Memory trick: Power of sale skips the judge's tale.