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.

Fractionalized Trust Deed

Escrow number V Should it become necessary in the future, for the investor to discuss a section of the escrow with the agent in charge, if the investor has the escrow account number it will be easier for the agent to locate the escrow file in question.

Some of these documents include the original or conformed copy of the recorded trust deed and the original note secured by the trust deed. 1 1. The Amortized Note - the amortized note is often used for real estate transactions.

It is not uncommon for a borrower to try and convince, or pressure a lender to give some slack in regards to terms and due dates for payments.
Are their Precautions I should take? For more information about Coppercrest Funding, or if you would like to learn more about becoming an active trust deed investor, you can visit them online today at www. _ The value of a deed of trust is fixed and is always stable. The trust deed is what will secure the repayment of funds that are owed according to the conditions of the note, and will then become a lien on the property. While most investments are made with the same end in mind, the main difference between each investment type are the strategies and the level or risk involved. Borrowers that create this type of problem can often be extremely difficult for an investor to deal with, especially if the investor is new to private money lending.

Under the beneficiarys instructions, the foreclosure officer will prepare the above documents.
00 would become 9. , and usually by homes that are within the local area of the investor. The reason is because the original note is not a recorded instrument, like the trust deed. 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.