Tag Archives: deed of trust

You Don’t Need to be a Weather Man to Know It’s Warm Outside
To simply make the declaration that “it is warm outside” can be a reckless statement, depending on your audience. A person from Orlando, FL will likely have a different definition of ‘warm’ than someone from Juneau, Alaska. You need more facts than just the air temperature to best assess the situation and make a comment that fits the scenario. Recently, RealtyTrac LLC. released its recap of U.S. foreclosures for the United States, during the 3rd quarter of 2013. The report found there were 131,232 properties indicating a default notice, scheduled auction, or bank repossession during September. On the surface, this may appear like a lot of properties, or referring back to our weather analogy, “warm”. In actuality, we need to view it in context of where the U.S. real estate and mortgage industries have been over the past few years. This number actually represents a...
Understanding Documents and Processes: Deed of Trust
In many cases the Deed of Trust is presented as an “offering” by a party that has an interest in presenting the investment in the best possible light through a sales department or Broker, both of which are commissioned on the dollars brought in.   In this quest to get the dollars from the investors to earn the fees, many times the documents and process are over-simplified to reduce objections and shorten the fund raising process.  Missing, inadequate documentation in Trust Deed investing carries a high potential for unnecessary litigation and or principle loss from the investor if the borrower defaults or the Mortgage Broker closes its doors. The documentation an investor needs generally falls under one of a two categories; Borrower and Property. Borrower documents include;
  1. Completed loan application,
  2. Credit reports, credit history verification or references,
  3. Income documents, financials, Tax Returns,
  4. Use of Funds plan (from the proposed Deed of Trust),
  5. Exit...
Taking a Good Attribute and Distorting it with the Deed of Trust Originator and the Borrower
An industry standard is for a Broker to strengthen the offering (to Investors) of the Trust Deed to investors by creating an interest reserve for the borrower.  An interest reserve account is money set aside to ensure the investors interest payments on a loan over a specified term.  This can be a good feature in the correct circumstances; however often times the actual source of the interest reserve and the math is not to the benefit of the investors and this may hide the weakness in the borrower’s cash flow and qualifications. The PITFALL occurs by a taking a good attribute and distorting it with the Deed of Trust originator and the borrower.  For example: Borrower acquires a parcel of land for $100,000 with $50,000 down payment.  This land later ‘appraises’ for $500,000.00 based on that value; Borrower requests a loan of $375,000 (75% LTV) The investor is offered...