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.

Trust Deed Fund

Chapter 14 - Frequently Asked Questions Since you are new to mortgage investing, you may have questions in regards to what it is, what it can do for you, and if mortgage investing is really worth it in the long run.

Under the beneficiarys instructions, the foreclosure officer will prepare the above documents. Another important difference is that title insurance is a single premium product. 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.

That being said, there are ways in which junior lien holders can protect themselves should this happen.
Title insurance, and the process that is associated with the creation of a title insurance policy, provides the investor with an in depth examination of the property title and everything that affects it. ) _ Other Liens (property taxes, judgment liens, etc. However, despite their differences, each policy works to insure some the following (Note: The list below is only a small sample of the insurance provided by these two policies): The deed of trust that is insured is recognized as a valid an enforceable lien. The reason why loan underwriting is so significant to trust deed investing is because part of the underwriting process is to determine the Loan-To-Value Ratio (LTV). 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. Are their Precautions I should take?

Within its pages you will discover all of the essential aspects that are required in order to make investing in a deed of trust a secure and safe risk taking experience.
_ Deeds of trust are only collateralized by real estate that occurs within the U. Note Without Recourse V If this note is written above the signature it implies that future holders will not be guaranteed payments. Not only is this an efficient means of collecting on a trust deed and a note, but it is more beneficial to the investor when there is a third party involved in the note and deed of trust, because the borrower simply has to make a single payment out to the servicing officer, instead of payments to multiple investors.