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.

Ira Real Estate Investing

Thus, this will ensure that the investor has the escrow number, the name of the escrow company, as well as the name of the individual responsible for the documentation.

However, regardless if you are loaning money on real property as security, or are investing in a deed of trust, the documents you would require for both are the same; you would require the trust deed and the note. Should a borrower file for bankruptcy, it is always in your best interest to respond as quickly as possible to ensure that you receive full payment of the amount owed to you. Once the payment has been received in full, and the funds are cleared, the loan servicing officer will then begin to issue the appropriate checks to the investor(s) involved in the loan. The holder of this not is protected by the law, as they are considered to be in good faith holding this negotiable note. Remember, all things being equal, the greater the Loan to Value, the more risky the loan. warehouses, factories, port facilities, mills, ships, etc.

This type of lending that is provided by Coppercrest Funding is commonly referred to as hard money or private money lending.
This remedy is a process known as foreclosure, and simply put; it is the process through which the property in question is sold in order to satisfy the debt owed to the lender. Even though each policy works in the best interest of the investor, ALTA is still considered to be the best choice among the two, and is something you should keep in mind when selecting a policy. Most lenders are in agreement that on certain types of loans, you would require a lower Loan to Value. Another reason is the borrower destroyed the property value by removing or demolishing the building(s), or by failing to keep the property in top condition. Finally, when it comes to a construction loan, construction control is imperative to any construction project.

_ A trust deed broker often charges investors no fees.
Thus, even if you have a copy of the original, it will not suffice because only the original note is considered to be the life of the transfer. A mortgage investment is not as liquid as a stock or bond. 5% (Note: This is calculated by using any handheld calculator. The reason is because the original note is not a recorded instrument, like the trust deed. When it comes to real estate lending, LTV is the single most important element, because an adequate LTV protects the initial investment, while a remaining cushion of equity helps to pay off any unexpected costs that may occur.