Chapter 5 - Legal Issues for Investors

When you invest in a trust deed there are certain legal issues that you need to consider. Regardless if you secure your trust deed investment through a single lender (whole) or by more than one lender (fractionalized), you will still need to follow certain rules and regulations as stated by real estate law.

Real Estate Law


The Real Estate Law includes what is commonly referred to as the multi-lender law. This multi-lender law has certain restrictions which it can impose on the investor. Some of these laws include, but are not limited to the following:

? The investor must have their loan serviced by a mortgage loan broker (MLB) and have a written agreement. Furthermore, the investor and the MLB need to arrange for a third party to take part in loan servicing. The third party should be a qualified, licensed real estate broker.

? A loan can have no more than 10 note holders or lenders.

? The investor is not permitted to invest more than 10% of their annual income or net worth

? Based on the type of property that is considered collateral, defined loan-to-value ratios are not to be exceeded

? Only under limited circumstances is the MLB allowed to self-deal.

? The investors loan is not permitted to be indirectly secured though any other deed of trust or promissory note, and is only secured directly through the property.


TILA - Section 32


Aside from the Real Estate Law, you may find that your loan documents will feature another legal document known as the federal Truth-in-Lending Act (TILA). The TILA was amended in 1994 and was created in respect to loans that are secured by a borrowers principal property. 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. Such mortgage transactions are known as high rate/high fee or Section 32 loans.

A loan that is considered to be high rate is one where the appraisal exceeds ten points on the Treasury Security yield that has similar development. A high fee loan, on the other hand, is one where the total fees and points are greater than 8% of the total loan amount. If you have any questions concerning the TILA, you can contact the Federal Trade Commission, as the TILA regulations are enforced by them.

As you can see there are many legal issues for investors to consider before they invest in a deed of trust. Make sure you understand all legalities concerning trust deeds before you make your investment.

Trust Deed Investment

_ A stock is a gamble.

When making an investment in a deed of trust, the trustor (borrower) makes the property transfer, in trust, to the trustee (independent third party). However, although a deed of trust acts like a mortgage, it is important that you understand there are differences between a mortgage and a deed of trust. Remember, the lower the number, the more equity the investor will receive on the property. Some of these documents include the original or conformed copy of the recorded trust deed and the original note secured by the trust deed.

Furthermore, contracts are reviewed to make certain that borrowed funds are sufficient to complete the project.
_ The security position of the stock owner is shared among thousands of other holders. Investing in a deed of trust generates a monthly income that is established through interest payments. While all notes function with the same end in mind, there are different types of notes that can be obtained. _ The investors loan is not permitted to be indirectly secured though any other deed of trust or promissory note, and is only secured directly through the property. A negotiable note must provide a set sum of money for the payment at a specific time, and must be payable to the holder. What if a note is lost?

Endorsements are very similar to the riders found in a variety of other types of insurance, and they provide coverage for precise issues that are not covered in the pre-printed title insurance policy.
The reason is because the original note is not a recorded instrument, like the trust deed. In addition, there are a number of other bonuses related to trust deed investing that you may want to keep in mind before choosing just any type of investment. Some of these investors have a strong relationship with Coppercrest Funding; a relationship that has been built and thrives on an enormous level of trust developed throughout the years.