Bulletin: AK000013

Dear Associates:

When the beneficiary's interest in a Deed of Trust is assigned ";for security purposes" or "as collateral" the assignment secures repayment of a debt from the beneficiary to the assignee. This is a lien on a lien.

If the beneficiary does not pay the debt the assignee can foreclose upon his security interest and step into the shoes of the beneficiary. The collateral assignment is personal property and this foreclosure takes place under the Uniform Commercial Code. There are two ways to do this in Alaska..

First, the collateral may be sold at a public or private sale in a method, manner, time, place and upon terms which must be "commercially reasonable". AS 45.09.504. The collateral is not the land; it is the promissory note and Deed of Trust between the trustor and beneficiary. Only the beneficiary's interest in these instruments is sold.

Second, the assignee may retain the promissory note and Deed of Trust as satisfaction of the debt owed. The assignee gives notice of retention to the beneficiary who has 21 days to object and require a sale. AS 45.09.505. If no objection is made the assignee retains the note and Deed of Trust as satisfaction of the debt owed to him.

In order for a collateral assignee to commence foreclosure of a Deed of Trust it must take one of the two steps outlined above. Either method puts the assignee into the shoes of the original beneficiary.

This foreclosure will occur off record and you will need an affidavit by the assignee that he has either had a sale of the debt or retained it.