Tom is a licensed broker-in-charge in Tennessee. A client asks him whether a lender can conduct a non-judicial foreclosure in Tennessee using a standard two-party mortgage instrument (instead of a deed of trust). Tom needs to give the most accurate answer. Which response best reflects Tennessee law?
Correct Answer
A) No, a standard two-party mortgage does not contain a trustee or power of sale clause; judicial foreclosure would typically be required for a mortgage, while deeds of trust enable non-judicial foreclosure.
A standard two-party mortgage (borrower and lender only) does not include a trustee or a power of sale clause, which are the structural elements that enable non-judicial foreclosure in Tennessee. Without a power of sale clause, the lender would typically need to pursue judicial foreclosure through the courts. Tennessee's non-judicial foreclosure process under Tenn. Code Ann. § 35-5-101 is designed for deeds of trust with power of sale clauses. This is why deeds of trust are overwhelmingly preferred in Tennessee real estate transactions.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
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