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.

Private Mortgage Investing

The rules of the TILA affect all mortgage transactions that are described as having fees or rates that are above a specific amount or percentage.

If the appropriate research has been done, the investment will have a more than sufficient loan to value (LTV) ratio. 75 paying approximately a 0. Delinquent taxes are paid 2. Although it may appear that each title insurance policy listed above appear similar, that ALTA policy is recognized as being far superior to the CLTA policy.

This multi-lender law has certain restrictions which it can impose on the investor.
Once the investor has the certified copy, the escrow company recognizes that the investor expects all conditions and terms of the escrow to be completed precisely. Are their Precautions I should take? Is a Mortgage Investment more Trouble than its Worth?

Distribution of cost, insurance costs, taxes and assessment 7.
However, dont mistake all property that is fastened to the ground to be real property; some of these items are personal. Chapter 5 - Legal Issues for Investors When you invest in a trust deed there are certain legal issues that you need to consider. Delinquent taxes are paid 2. While some loans can have a 15 year term, many have a three year term or less. Once the title company has finished its examination of the property, the title agent will then share the results of the research with the investor, revealing the title condition.