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.

Free Deed Of Trust Form

_ A trust deed broker often charges investors no fees.

The title attorney or escrow agent will ensure that the exchange of documents and funds runs smoothly. What is private money lending? Therefore, it is imperative that you carefully read and re-read all the closing documents.

In addition, the agent will request a written statement regarding the default amount, the date up to which the interest is paid, the due date of the payment, and the unpaid principal balance.
In addition, it is highly recommended that you always insist the Borrower takes personal responsibility on the promissory note. For instance, a good rule of thumb that every investor should follow is to never have an LTV higher than 70%. That being the case, you may find it in your best interest to first speak with a qualified professional or a mortgage loan broker before you make any commitments with your money. Some of these documents include the original or conformed copy of the recorded trust deed and the original note secured by the trust deed. 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. That being said, a person may choose to recourse a note so that the payment goes to one individual in particular and no one else.

Acceleration Clause V An acceleration clause should be apart of the escrow documents.
Furthermore, investing in trust deeds for your retirement is safer than running the risk of being stuck in a low yielding mutual fund, or a bad stock. However, although there is always some degree of risk involved when making an investment, trust deeds happen to be one of the safest investments available today, because unlike other investments, a trust deed is secured by actual property V homes, buildings and land. This report details items that have been completed and are still under construction. As far as monetary is concerned, the defaults include are as follows: _ Nonpayment of a balloon payment (when all the payment is due at one time)_ Advancements for each provision of the trust deed in regards to insurance or taxes. 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). Is a Mortgage Investment Liquid?