Credit Default Swap

What state law(s) provides for a Credit Default Sawp at Trustee Sale rather than cash or a cashier’s check required of any other purchaser, allowing the Mortgagee/Beneficiary to reacquire the subject property at an amount less than the amount owed, which seems to be a standard practice in the industry?

I think you are mixing up your terms. The mortgage company is allowed to “credit bid” up to the amount they are owed on the property. The reason this is allowed is that they would receive the money anyway as they are first in line for any proceeds from the sale. If they want to bid as much as a penny more than what they are owed they have to show up with cash like anyone else.
This has nothing to do with credit default swaps.

What is Credit Default Swap??

Credit default swaps are financial derivatives traded by institutional investors on Wall Street. ?They serve as insurance policies and pay off if the relevant party defaults. ?So for instance, when GM went bankrupt, people who bought Credit Default Swap protection on GM were paid out. ?In contrast, when Bear Stearns was purchased by JP Morgan, people who owned Credit Default Swaps on Bear Stearns were not paid out because Bear never actually defaulted on payments. ?
CDS are only remotely related to residential real estate at the individual property level. ?