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.

Deed Of Trust

Due to the fact that there are so many diverse varieties of factors, additional forms of coverage have been continuously developed in forms of endorsement.

If this action can not be performed, it may become mandatory that you seek the service of an attorney. With a mortgage investment you have control over when you receive your checks, which allows you to obtain your money as quickly as possible. In addition, the agent will request a written statement regarding the default amount, the date up to which the interest is paid, the due date of the payment, and the unpaid principal balance. 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. While all notes function with the same end in mind, there are different types of notes that can be obtained. This is due to the fact that borrowers are willing to pay a higher interest rate because private investors are flexible with their loans, as they are not limited by traditional rules of bank loans.

The standard yield is 11 V 14% per annum.
_ Only two parties are involved in a mortgage document - the lender and the borrower. Acceleration Clause V An acceleration clause should be apart of the escrow documents. However, if problems do arise, the borrower is encouraged to set them right should they wish to protect their equity in the project. _ Trust deeds, on the other hand, are purchased and sold through brokers, but can also be purchased and sold privately at no extra charge. At the same time every month, statements and a check that covers the interest earned throughout the month are mailed to the investor(s). Loans that involve the least amount of risk are those to V While most lenders will only lend 50% or less of the actual value of vacant land, it is also true that many lenders will not lend to corporations or trusts.

It is through strict and constant enforcement that reliable payment and performance is maintained.
When beginning the non-judicial foreclosure process, there are certain documents that the investor will be required to give the foreclosing officer. Losing a note is a problem that is also quite costly. Some of these documents include the original or conformed copy of the recorded trust deed and the original note secured by the trust deed.