The credit bid up is typically set at the amount of the indebtedness. The courts logic is it would be useless to require him to tender cash which would be immediately returned to him. (Central Sav. Bank of Oakland v lake (1927)201 cal.438 447-448, 257 p. 521.) However the mortgagee is not required to open the bidding with a full credit bid but may bid whatever amount he thinks the property is worth.
In a foreclosure held in power of sale the lender mortgagee is transferred the legal title upon declaring the default. This is what enables the beneficiary to elect the substituted trustee to handle his affairs in the recovery of the collateral for the impaired assets held on his books.
Herein one assumes the legal title is allowed to set the price for the value of the property with consideration for the balance outstanding. If no other parties bid at sale the title Reconveyance back to the legal title holder.
My testimony before the US Bankruptcy Court in Santa Ana California stressed this issue of credit bidding and conveyance versus re conveyances is substantive in the event of no other bids. The beneficiary mortgagee enters the value and not a bid, for the full amount of the obligation owing him together with cost and fess due in connection with the accrued cost to carry the impaired mortgage and not the cost limited to the sale.
Herein is how I form the basis for the argument.
If the legal title holder is bidding his own property versus setting the value the mortgagor is in essence constructing a sale with dual consideration. The bid entered would be in excess of the asset carries on the books for the impaired mortgage and would somehow suggest that the credit bid is drawn down against the value of the mortgage.
The value of the mortgage is extinguished by offset at the time the trustee provides a formal Reconveyance for legal title to the estate assuming NO OTHER BIDDERS ENTERED A BID FOR AT SALE.
A beneficiary and mortgagee may also submit an opening value and not a bid, at whatever price it may so elect to do so in accordance with its expectations for keeping the property. If a bidder exceeds the value set then the lender can provide in advance the instructions to the trustee to CREDIT BID in excess of the highest bid in order to keep the asset as an REO.
This is fact and the courts still fail to address the differences in a conveyance for credit bid and Reconveyance of legal title absent any bids.
The case in point is would the trustee enter a second credit bid to keep the property in the event of a third-party investors making a higher bid than the lenders opening credit bid.?
No as this makes no sense at all.