Notice of Default
In those states where nonjudicial foreclosure is used, the lender starts the process by filing a notice of default. That notice is filed at the county courthouse in the deed recorder's office.
With the nonjudicial foreclosure, a trust deed is used in the same way a mortgage is used. The deed of the property had been placed in trust. Most commonly the third party is a trust company or a title company.
Should the borrower become delinquent with loan payments, the lender can request the trustee to file a notice of default in the county where the property is located. The deed of trust contains a power-of-sale provision that authorizes the lender to sell the property through the trustee rather than a judge.
There is no legal action or foreclosure complaint to be filed when the nonjudicial foreclosure process is used. Since the trustee has already been determined at the time the deed was prepared, foreclosing on a property by a lender is faster and costs much less than a judicial foreclosure.
To start the foreclosure, the lender forwards a declaration of default along with the instruction to the trustee to proceed with the notice of default. The trustee creates the notice of default, records it at the county courthouse, and sends copies to the lender and borrower. If the borrower in default does not pay off the default within a specific time frame, the trustee will schedule a public sale of the property.
The trustee is required to be a neutral third party. The trustee must not favor either the lender or the borrower. In some areas title companies or trust companies act as the trustees. In other areas lawyers act as the trustee.