The Untrained Professional: Foreclosure Trustees and the Missing Competence Standard

This article is addressed to the industry, because the people who can fix the problem it describes are the people who staff the role.

In a deed of trust state a foreclosure is conducted by a trustee. The structure exists because someone has to hold the power of sale, and the law placed it with a party other than the lender. What the law asks of that party differs from state to state. What no state reviewed here asks is that the trustee learn the duty before exercising it.

Four states, four versions of the duty

• North Carolina. The trustee in a power of sale foreclosure has a fiduciary duty to both the debtor and the creditor and must be impartial (In re Foreclosure of Vogler Realty, Inc., 365 N.C. 389 (2012)).
• Virginia. A trustee under a deed of trust is a fiduciary for both debtor and creditor and must act impartially between them (Smith v. Credico Industrial Loan Co., 234 Va. 514 (1987)). In 2018 the Supreme Court of Virginia confirmed that this duty of impartiality exists at common law even where the deed of trust is silent (Crosby v. ALG Trustee, LLC, 296 Va. 561 (2018)).
• Washington. The statute says that the trustee “has a duty of good faith to the borrower, beneficiary, and grantor” (RCW 61.24.010(4)). It also says the trustee has no fiduciary duty to the grantor (RCW 61.24.010(3)).
• Texas. A trustee may not be held to the obligations of a fiduciary of the mortgagor or mortgagee, and its assigned duty is to exercise the power of sale in accordance with the security instrument (Tex. Prop. Code § 51.0074(b)).

The four differ in what they ask. In two of these states the person conducting the sale owes the homeowner the duties of a fiduciary, in one a statutory duty of good faith, and in one only the duty to follow the instrument. In all four the trustee decides whether the paperwork in front of it supports a sale, and making that decision requires knowing what the paperwork has to show.

Who may serve

Washington has the most detailed entry rule of the four. Under RCW 61.24.010(1) a trustee must be a domestic corporation or limited liability company with at least one officer who is a Washington resident, a title insurance company or licensed title insurance agent, an attorney who is an active member of the Washington State Bar, a professional entity owned entirely by such attorneys, an agency or instrumentality of the United States, or a federally chartered bank, savings bank or savings and loan association.

Every item on that list concerns the trustee’s legal form. Chapter 61.24 RCW contains no examination, curriculum or continuing education requirement for trustees, so the careful gate the state built is a gate about corporate form.

Texas sits at the other end. A substitute trustee is whoever the current mortgagee or mortgage servicer appoints under the security instrument to exercise the power of sale (Tex. Prop. Code § 51.0001(7)). Since 2015 the appointment can be made in the notice of sale itself, signed by an attorney or agent of the mortgagee or servicer (Tex. Prop. Code § 51.0076). In 2023 the Texas Attorney General concluded that a court would likely treat a corporate entity as eligible to serve (Tex. Att’y Gen. Op. No. KP-0424), and in 2025 the legislature amended the definition to say so expressly (S.B. 372, effective September 1, 2025). The statute sets no qualification beyond the appointment.

Where ethics rules attach, they arrive through another license

Attorney trustees are bound by rules of professional conduct because they hold a bar license. North Carolina amended its statute in 2017 to provide that “an attorney who serves as the trustee or substitute trustee shall not represent either the noteholders or the interests of the borrower while initiating a foreclosure proceeding” (N.C. Gen. Stat. § 45-10(a)). The amendment followed a State Bar ethics opinion about a law firm that had set up a separate entity to serve as trustee while its lawyers represented the lender (2008 Formal Ethics Opinion 11, adopted in 2010).

North Carolina’s procedures manual for court clerks describes the position of a trustee who is not a lawyer. Such a trustee is not bound by the ethics rules and opinions that govern lawyers and still has a fiduciary responsibility to both debtor and lender. The gap is visible in that description, because a fiduciary duty attaches to a person who may have received no instruction in what the duty requires and who answers to no professional body for getting it wrong.

What the structure looks like from outside

In practical terms, the trustee is selected by one of the two parties to the foreclosure and paid by that party, and may be affiliated with that party’s law firm, its servicer or its title insurer. The homeowner often has no lawyer and may not respond at all. A role designed as a check can end up operating with the incentives of an agent.

Washington shows what the duty requires in practice

Before a notice of trustee’s sale on residential property of up to four units is recorded, transmitted or served, the trustee must have proof that the beneficiary is the holder of the note or other obligation secured by the deed of trust. A declaration by the beneficiary under penalty of perjury is sufficient proof (RCW 61.24.030(7)(a)). The trustee may rely on the declaration unless it has violated its duty of good faith (RCW 61.24.030(7)(b)).

Washington’s Supreme Court has filled in what that reliance requires. In Bain v. Metropolitan Mortgage Group, Inc., 175 Wn.2d 83 (2012), the court held that under the deed of trust act the beneficiary must hold the note. In Lyons v. U.S. Bank National Association, 181 Wn.2d 775 (2014), a declaration stated that the beneficiary was the actual holder of the note “or has requisite authority” to enforce it. The court held that the declaration did not comply with the statute because the alternative wording left unclear which status was claimed. It said that a trustee with an indication that a declaration might be ineffective should verify it before starting a sale, and it sent a Consumer Protection Act claim against the trustee back for trial. The court also observed that the statute’s declaration is one way of proving the beneficiary’s status among others.

In April 2026 the court answered two questions certified by a federal court in Marquez Vargas v. RRA CP Opportunity Trust 1, No. 103735-0 (Wash. Apr. 30, 2026). It held that a home equity line of credit agreement is not a negotiable instrument, that “holder” in the statute means the holder of a negotiable instrument under Article 3 of the Uniform Commercial Code, and that a beneficiary cannot satisfy the proof requirement by declaring that it holds a HELOC agreement. The court noted that judicial remedies remain available to the lender.

Put those decisions next to the trustee’s safe harbor. A trustee is protected when it relies on a declaration in good faith, and Lyons shows that relying on a declaration that is deficient on its face can expose the trustee to a claim. After Lyons the trustee has to recognize ambiguous alternative wording. After Marquez Vargas the trustee has to recognize whether the underlying instrument is negotiable at all, which means reading a credit agreement against the formal requirements of UCC Article 3. That is legal analysis, and the statute that requires it asks for no training in it.

What we are not claiming

The pattern we see is one of training, and we make no claim that trustees fail on purpose. Our Competency Gap video and deck report that in the eight files we have worked most closely, 93 of 145 scored burden elements were not carried by the enforcing party’s own record. Eight files cannot describe an industry. What they do show is the same defects recurring across different institutions, which is why we look to training before we look to intent.

We are also not claiming that the duty is uniform. Its source varies from trust law to statute to the instrument itself, and other states place a review duty on a different party. California requires the mortgage servicer to review competent and reliable evidence that substantiates the default and the right to foreclose before foreclosure documents are recorded (Cal. Civ. Code § 2924.17(b)). Texas requires a court order before a home equity loan can be foreclosed (Tex. Const. art. XVI, § 50(a)(6)(D)). What stays constant is that the state defines a responsibility and leaves the competence to carry it undefined.

The open question

If your staff conduct sales, prepare declarations or sign notices, the question is whether they are trained on the rules above or on a narrower routine that lets these duties fall between departments. Our deck sets out six requirements a workable competence standard would contain. If your organization trains or supervises people in this chain, see how we work with partners.

An earlier version of this article appeared in The Corporate Critic, our LinkedIn newsletter, on August 13, 2026. This version has been revised and expanded. This article is general information and is not legal advice. Trustee duties vary by state, and nothing here describes the law of a state that is not named. No allegation of misconduct is made against any individual, firm or institution.

Sources

• RCW 61.24.010, Trustee, qualifications and duties
• RCW 61.24.030, Requisites to trustee's sale
• Bain v. Metropolitan Mortgage Group, Inc., 175 Wn.2d 83 (2012)
• Lyons v. U.S. Bank National Association, 181 Wn.2d 775 (2014)
• Marquez Vargas v. RRA CP Opportunity Trust 1, No. 103735-0 (Wash. Apr. 30, 2026)
• N.C. Gen. Stat. § 45-10, Substitution of trustees
• UNC School of Government, New Legislation Applicable to Attorneys Serving as Trustees in Chapter 45 Foreclosures (2018)
• North Carolina Clerk of Superior Court Procedures Manual, chapter 130, Foreclosure Under Power of Sale (2012)
• North Carolina State Bar, 2008 Formal Ethics Opinion 11
• Smith v. Credico Industrial Loan Co., 234 Va. 514 (1987)
• Crosby v. ALG Trustee, LLC, 296 Va. 561 (2018)
• Tex. Prop. Code § 51.0001, Definitions
• Tex. Prop. Code § 51.0074, Duties of trustee
• Tex. Prop. Code § 51.0076, Effective date of appointment
• Texas Senate Research Center, bill analysis of S.B. 372 (2025)
• Tex. Att'y Gen. Op. No. KP-0424 (2023)
• Cal. Civ. Code § 2924.17