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What Is a Substitution of Trustee?

Mary McMahon
Updated Jun 04, 2024
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Navigating the complexities of trustee changes, a substitution trustee becomes a pivotal legal instrument. In the realm of real estate, this document gains prominence, with the Mortgage Bankers Association reporting that as of the fourth quarter of 2023, the delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 3.88%. This indicates potential scenarios where a trustee may need to be replaced to manage foreclosure proceedings effectively. 

Similarly, in private trust management, where trustees oversee asset distribution, the need for a substitution trustee can arise to ensure the trust's directives are honored. There are over 1.9 million registered nonprofit organizations in the U.S., many of which operate under trust agreements requiring diligent trustee oversight. A substitution trustee ensures continuity and adherence to the trust's terms, safeguarding the interests of all parties involved.

In many cases, when a trustee is appointed, a secondary trustee is named in the documents filed at the time. This person is named to take over in the event that the original trustee becomes unable or unwilling to do the job. If the secondary trustee needs to step up to assume duties, a substitution of trustee will be filed to formalize the change. Beneficiaries can also appoint an entirely new trustee to take over.

This document must be filled out completely and submitted to the clerk or recorder in the region where the original legal documents are filed. In the United States, for example, the county clerk in the county where the deed of trust and other matters relating to a real estate sale were filed would need to receive the substitution of trustee document. Notices must also be sent to people with an interest in the trust, such as a landlord's tenants.

Blank forms that people can fill out are sometimes available from government offices and they can also be found in books of legal forms. A lawyer can also draw up a substitution of trustee for people who need one. It is important to use a document that has been prepared or reviewed and approved by an attorney to confirm that all of the necessary information is present. If there are errors in the document, they can be used to challenge the validity of the document and may create problems in the future. People who are in doubt should consult an attorney to confirm that the form is correctly filled out.

The information on such documents enters the public record and anyone may look it up. People who are acting as trustees should be aware that they can be relieved of their positions if the beneficiary or a concerned party suspects that the trustee is not representing the beneficiary's best interests.

What is a Substitution of Trustee and Full Reconveyance?

A substitution of trustee simply names a new person to take over that position, as well as a secondary trustee if necessary. A substitution of trustee and full reconveyance serves two purposes:

  • It enables a lender (such as a mortgage company) to appoint a new trustee
  • It allows the new trustee to release the lien.

When the new trustee releases the lien, it is known as "reconveyance."

When a borrower (either an individual or a business entity) takes out a loan in order to purchase real property (i.e., a house, building or piece of land), that property serves as collateral for the loan. The lending institution then issues a promissory note. The county where the property is located then records the transaction in a deed of trust.

  • the original lender (also known as the beneficiary)
  • the trustee
  • the trustor (person or business that took out the loan).

The trustee's job is to enforce the terms of the loan. When the trustor violates those terms (i.e., fails to make payments), the trustee then has the right to sell the property and recover the lender's investment.

On the other hand, if and when the loan is paid off, the lender issues the trustee the original promissory note, the deed and a request for full conveyance. Once a full reconveyance has been executed, the lender receives a copy, while the deed and promissory note are delivered to the borrower (trustor).

A substitution of trustee and full reconveyance is used for a situation in which the loan is paid in full and the trustee fails to execute a full reconveyance. This allows the lender to appoint a new trustee.

This document is also used when a borrower refinances a loan since the old loan is paid off by the proceeds from the new one.

Who Signs Substitution of Trustee and Full Reconveyance?

When the substitution of trustee and full reconveyance is executed, it is signed by the original lender and the current trustee. In order for it to be legal, the document must be signed in the presence of a notary and properly recorded.

What is a Notice of Substitute Trustee Sale?

The notice of a substitute trustee sale is simply a public announcement that a property is to be sold at auction. This happens after a property owner has missed several payments and efforts to resolve the situation have failed. Real estate investors watch these announcements closely. However, novices and "house flippers" who hope to score a lucrative deal at such an event do not always realize that buying a property at auction is much different than going through a real estate agent and taking out a mortgage. There are definite advantages to purchasing a property at auction. However, there are also pitfalls and dangers of which the buyer should be aware.


The biggest advantage to buying property at auction is price. The lender at this point simply wants to recover any losses; therefore, the opening bid will be set at the amount owed on the mortgage, which may be substantially lower than the property's actual value.

A second advantage is less competition. Buying a foreclosed property is a cash-only deal; an investor cannot take out a mortgage in this situation. He or she may secure a personal loan beforehand, but the bottom line is that payment in full is expected before the deed is signed over. Furthermore, in order to bid at an auction, a deposit is required and the penalty for forfeiting is steep. All of this means far fewer qualified bidders.


Taking on a property that has been foreclosed on can be complicated and risky. Purchasing a property through a real estate agent and a mortgage company offers certain guarantees and protections that are not available to buyers at an auction. For example, a traditional homebuyer does not have to commit to the purchase until the home has undergone a professional inspection. They are also protected in case there are any issues with the title, such as judgment in a lawsuit or other lien.

The person who buys property at an auction agrees to accept the property in its current condition, for better or worse. There's no room to negotiate the cost of necessary repairs. Furthermore, any issues with the title become the new owner's problem, if they arise. Finally, if the property is a rental, the new owner will be responsible for evicting any tenants living there when the property is sold.

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Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a MyLawQuestions researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By anon934900 — On Feb 22, 2014

First of all, it never was their home, but removing a human from their shelter must be a grievous assignment. Being in loss mitigation for seven years gives me the insight that most people who are foreclosed upon do not have the savvy or tact or resources to understand their financial situation past any type of simple understanding and thus never should have been given a massive loan to pay back or should have signed up for it in the first place.

Most people who are foreclosed upon (but not all) are uneducated, lower socioeconomic types from a long lineage of lower class, uneducated ancestry. The ethnicity of this group of people is even, except for Asians, who are very much more responsible about their financial obligations.

Since the people affected by the financial college pipeline sharks who work for the lenders or as brokers are mostly underclass, they were defenseless to stand up for themselves or just did not know how to. The jobs going overseas which helped most people pay for their mortgages which cost up to 50 percent of their monthly income, didn't just go overseas; they disappeared completely. But that is not the lender’s fault. It is an unfortunate situation that must be taken on and handled by the borrowers themselves. Today’s society does not believe in self reliance and needs always to point the finger of blame at someone or something else. It sickens me to think that my tax dollars go to help these irresponsible borrowers or the irresponsible, greedy lenders with modification programs.

A 2011 survey on FNMA borrowers showed that the average education level of a FNMA borrower was 14 years old (pre high school). The default rate on loans converted to modifications of existing mortgages was 70 percent for the first mod or trial payment in 2011.

By ceilingcat — On Aug 23, 2011

@Azuza - I see what you're saying, but I don't think there is any reason to vilify bank trustees! Someone has to be responsible for handling the sale of a foreclosed property. I'm sure the trustee has nothing to do with deciding what property gets foreclosed on or anything like that.

I also wanted to mention that if you are appointing a trustee to manage assets that are in a trust, be careful. Very few people will manage other people's assets like they are their own, you know? It's hard to know if people are trustworthy sometimes!

By Azuza — On Aug 22, 2011

I bet bank appointed trustees have had their work cut out for them the last few years! I know the rate of foreclosure in this country has been extremely high since the recession hit.

I know it's just a job, but I think I would feel bad acting as a trustee for a foreclosed property. A lot of people have been foreclosed on due to circumstances beyond their control. I don't think I would want any part in the process of throwing someone out of their home.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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