This Comment introduces how deeds of trust were developed to allow the lender to avoid the judicial process by engaging in a nonjudicial foreclosure. This Part also explains that the confusion in the courts arose because deeds of trust are not defined in the statutes that govern them. Part III describes the early understanding of deeds of trust in California common law under the title theory and how California courts have increasingly rejected the title theory in favor of the lien theory. Part IV introduces the rise of a private alternative to public recording of assignments of deeds of trust and how this created problems in states that have statutes requiring the public recording of assignments for valid foreclosures. Part V discusses the controversy that arose among the federal courts in California due to the ambiguous nature of deeds of trust in California’s statutes and common law and how courts have reacted to the private recording system introduced in Part IV. Part VI discusses solutions to the conflict, focusing on the statutory schemes of numerous states that avoid the problem of ambiguity regarding deeds of trust in California, and discussing how the private system of recording could avoid the controversy by allowing easy public access to its records of assignments. Finally, this Comment concludes that, due to the drawbacks of other solutions, the California Legislature must revise the foreclosure statutes—particularly section 2932.5—to create a balanced and comprehensible foreclosure system that would protect the interests of both borrowers and lenders.
Left to Their Own (Security) Devices: The Need for the California Legislature To Define Deeds of Trust and Update California Civil Code Section 2932.5 in Accordance with the Modern Lien Theory,
San Diego L. Rev.
Available at: https://digital.sandiego.edu/sdlr/vol50/iss1/7