Chapter 2 - The Basics of Trust Deeds

At this point you know that a trust deed is one of the safest investments you can make that offers you a high return, but what exactly is a trust deed? A trust deed, or deed of trust is a document that is used to secure the debt on a home acting as a mortgage. A trust deed is recorded as a lien on real property. 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. These differences will be discussed later on in this chapter.

A trust deed is used as security for a loan on real property, and the specifics regarding the loan are written in a promissory note. A deed of trust is then documented at the county recorders office to legally notify the world that the property in question has now been pledged to secure a loan.

There are three parties involved in a trust deed:
1. Beneficiary Investor/Lender/note holder
2. Trustor Borrower
3. Trustee Third party selected by the investor who has the legal power to act on the investors behalf and hold title until the note has been paid.

What secures a trust deed investment?

When making a trust deed investment, the deed of trust recorded against the borrowers property title is what secures the lenders investment. When making an investment in a deed of trust, the trustor (borrower) makes the property transfer, in trust, to the trustee (independent third party). The trustee then holds the conditional title on the behalf of the beneficiary (investor/lender/note holder), and then either of the following takes place:

1. The trust deed will be returned to the borrower once they satisfy all of the terms and conditions that were outlined in the promissory note

2. The property will be put up for sale should the borrower default also known as foreclosure. Foreclosure is the process that is taken by the investor in order to sell the property to a bidder from a third party, or to obtain title to the property. Usually the foreclosure sale satisfies the debt that is owed to the investor.

The difference between trust deeds and other investment types

What is the difference between a mortgage and a deed of trust?

The following are the basic differences between a mortgage and a deed of trust:

? Only two parties are involved in a mortgage document - the lender and the borrower.

? Three parties are involved in a trust deed the lender, the borrower and the trustee.

? With a mortgage document foreclosure the state law will determine the foreclosure method that will take place, which can sometime involve a lengthily process.

? A deed of trust usually involves a quicker foreclosure, because the most common type of foreclosure is a non-judicial one.


The different between investing in a deed of trust and the stocks

? The value of a stock fluctuate hourly, and sometimes by the minute.

? The value of a deed of trust is fixed and is always stable.

? An owner of stock is in third lien position.

? The owner of a trust deed is generally first or second in regards to the lien position.

? Every stock investor is charged a fee from their stock broker.

? A trust deed broker often charges investors no fees.

? Stocks can be purchased and sold through brokers.

? Trust deeds, on the other hand, are purchased and sold through brokers, but can also be purchased and sold privately at no extra charge.

? The security position of the stock owner is shared among thousands of other holders.

? The security position of the owner of a trust deed is not shared with anyone.

? A is supported by conglomerate properties and equipment that are often from foreign countries (ex. warehouses, factories, port facilities, mills, ships, etc.).

? Deeds of trust are only collateralized by real estate that occurs within the U.S., and usually by homes that are within the local area of the investor.

? A stock is a gamble.

? A trust deed is an investment


Although it is evident that there are many differences between trust deeds and other types of investments, one thing is for certain a trust deed is an investment opportunity that offers you a high return with less risk.

Trust Deed Brokers

The reason is because LTV means to loan a percentage of money that is less than the actual property value.

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. _ The security position of the stock owner is shared among thousands of other holders. ) if they fail to pay the loan. That being the case, it is in the investors best interest to loan through a third party that has the experience to deal with problem borrowers. Speak to qualified professionals, and dont be afraid to ask questions, or rethink your decisions before making an investment. And remember, make sure the loan servicing company you choose has experience, integrity and a good reputation.

Casualty and Fire Insurance V Insurance is imperative when it comes to making a trust deed investment; because as an investor you will want to ensure that you have sufficient insurance to protect your investment.
Once prepared, the officer will have all beneficiaries involved sign the DOD, NOB, SOT and the Non-military Affidavit with the attached notarization. Ground-up Construction Loan V This loan is one that assumes the borrower has approvals and a completed set of plans which are sufficient so that construction can begin once the loan has been funded. 75 paying approximately a 0. This allows them the ability to approve and fund loans within hours or days of a submitted application. Your check should be given directly to your attorney or the Title Company.

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.
The Demand Note V This note is used only on special occasions and is subject to be called in at any time for full payment. Furthermore, it is in the investors best interest to safely secure the escrow agents card, and inset the escrow number on it. Those that use unilateral escrow instructions generally sign at the end of the escrow term, while those that use bilateral escrow instructions usually draw up and sign in the initial opening of escrow. The holder of this not is protected by the law, as they are considered to be in good faith holding this negotiable note.