Chapter 9 - Lien Priority

You may or may not be aware, but a deed of trust is actually a lien on a piece of real property. What is a lien? A lien is a legally recognized claim or hold against one persons item by another which utilizes this item as security for a duty, debt or obligation. If there is more than one lien on a piece of real property there could be a number of reasons for this. Some of the liens an investor may encounter include:

? Tax liens
? Mechanics liens
? IRS liens
? Judgment liens
? Etc.






A few interesting facts about liens
It is important for you to know that liens in first priority are the most ideal. Therefore, in order to obtain this priority, this needs to be verified before the closing of escrow. In order to obtain the accurate information that is required to verify the priority of the deed of trust, you will find that Title insurance policies will provide you with what you need to know.

If it happens that an error is made, or a lien has been overlooked and such aspects affect the trust deed holder, then the holder can take legal action against the company that issued the title insurance policy.

When the holder is in possession of the priority lien, they can foreclose and any junior lien holders wont be able to stop it. That being said, there are ways in which junior lien holders can protect themselves should this happen.

To begin with, they can make certain that their lien has been accurately recorded with the county recorders office. They can also inform all senior lien holders about their lien, and ask them for written notification before they foreclose.


Tax Liens
Tax liens have priority over deeds of trust. This is a fact you wont want to forget should a tax lien appear. Thus, in order for the investor to protect themselves in the event of a tax lien, a provision should be added in the trust deed and note that explains if the borrower and their property have or will receive a tax lien; it is the trustors responsibility to contact the investor.

In addition, the note should provide the investor with the choice of needing the payoff, so that they can protect their principal from foreclosing on the tax lien.

California Note And Trust Deed Procedure

In order to obtain the accurate information that is required to verify the priority of the deed of trust, you will find that Title insurance policies will provide you with what you need to know.

What is a lien? Know your borrowers financial status and their credit worthiness. The borrower could loose their property (home, land, etc.

Thus, it is highly recommended that if you do decide to lend to either of the above mentioned entities, you require a larger money down payment and/or a lower Loan to Value.
The process of underwriting is what the lender goes through in order to qualify a borrower for a loan, and also makes certain that the loan has been properly documented and structured. Lastly, should the foreclosure be stalled or halted by a borrowers bankruptcy petition, the in-house legal counsel will immediately try to relieve the stall or request the bankruptcy court provide sufficient protection. That being said, there are ways in which junior lien holders can protect themselves should this happen.

As far as monetary is concerned, the defaults include are as follows: _ Nonpayment of a balloon payment (when all the payment is due at one time)_ Advancements for each provision of the trust deed in regards to insurance or taxes.
Chapter 12 - Loan Enforcement While it is true that trust deed investing is one of the safer ways in which to obtain an excellent return on an investment, there is always the chance that the borrower may default. The best way to ensure that you avoid pitfalls is to learn as much as you can about trust deed investing and everything it involves. Therefore, a ,000 loan to a property worth 0,000 has a 70% LTV. The Straight-Interest-Only Note V The straight-interest-only note, is one that does not require payments of principal during the life of the loan.