TRUST DEED INVESTMENTS W Y S K
TRUUST DEEDINVVESTMEENTSWHAT YOUU SHOULDD KNOWW !!SERVINGG CALIFORNIANS SINCE 1917DepartmentOFREAL ESTATE
TRUUST DEEDINVVESTMEENTSWHAT YOUU SHOULDD KNOWW !!EDMUNND G. BROWWN, JR.GovernorStaate of CaliforrniaANNA M. CABALLLEROSecretaryBusinesss, Consumer Services,and Housing AggencyWAAYNE BELLLCommissioneerBureeau of Real EstateSERVING CALIFORINIANS SINNCE 1917DepartmentOFREAL ESTATE(Revised by DRE, March 2014)i
TRUST DEEDINVESTMENTSWHAT YOU SHOULD KNOW !!Originally Prepared by:PARKWAY LAND, INC.,a California corporation2807 Castro Valley Blvd., Castro Valley, CA 94546S. GUY PUCCIOPresident, Principal Researcher and AuthorJAMES A. NORDELLEditor and ResearcherGEORGE W. PFEIFFER, ESQ.Legal Consultant and ResearcherNOTEThis brochure was originally produced through a researchcontract from the California Department of RealEstate. The information in the brochure is a briefoverview of the basic steps and factors involvedin a trust deed investment. Since this brochuremay not contain current law changes, it should only beused as a general source of information.You maywish to research the subject further beforeproceeding with a trust deed investment and, shouldthe situation warrant, discuss the matter with an attorneyor other qualified professional.Some of the views and opinions contained in thesematerials are those of the authors and do not necessarilyrepresent the views or opinions of the Administration,the State of California, or its Department of Real Estate.ii
TRUST DEEDINVESTMENTSWHAT YOU SHOULD KNOW !!Table of ContentsI. IntroductionWhat is a “promissory note”?.1How do you obtain a promissory note?.1What secures your investment? .2II. Seven Essential Elements1. Knowledge, experience, and integrity ofthe Mortgage Loan Broker (MLB) throughwhom the transaction may be made orarranged .52. Market value and equity of the propertyand the security for your loan . 53. Borrower’s financial standing andcredit worthiness . 104. Escrow process involving the funding ofthe loan or the purchase of the promissorynote. 115. Documents and instruments describing,evidencing, and securing the loan orpurchase of the promissory note . 136. Loan servicing provisions, authority andcompensation . 197. Recovering your investment when theborrower fails to pay . 22iii
INTRODUCTIONThe purpose of this brochure is to provide basicinformation which you should know if you plan topurchase existing promissory notes or fund loans, therepayment of which is secured by deeds of trustrecorded against California real property. Thefunding of a loan or the purchase of a promissorynote is an investment which involves risk. Prior tobecoming a lender of loans or a purchaser ofpromissory notes, you should be able to answer thefollowing questions:1. What is a “promissory note”?A promissory note is a written promise to payor repay a certain amount of money at a certaintime, or in a certain number of installments, or ondemand to a named person and it usually providesfor payment of interest.The person receiving the loan proceeds(borrower) becomes obligated to repay the debtby signing a promissory note which specifies:(1) the amount of the loan (principal); (2) theinterest rate (interest); (3) the amount andfrequency of payments (debt service); (4) whenthe borrower must repay the principal (duedate); and (5) the penalties imposed if theborrower fails to timely pay or tender a payment(late charge) or decides to pay a portion or all ofthe principal prior to the due date (prepaymentpenalty). The promissory note identifies theborrower and the person who will receive thepayments (lender or note holder).2. How do you obtain a promissory note?You obtain a promissory note (become a lender ornote holder) by either making a loan or purchasingan existing promissory note. Unless the loan ismade or arranged by a real estate broker, a privateparty when making a loan will be subject to aninterest rate ceiling imposed by the CaliforniaTRUST DEED INVESTMENTS1
State Constitution. Charging a rate in excess ofthis ceiling is referred to as usury. Even whenpurchasing an existing promissory note (unlessthe purchase is arranged by a real estate broker),a private party, depending upon the fact situation,may still be subject to usury.A broker who for compensation, or in expectationof compensation (regardless of form) assists thepublic in making or arranging loans is commonlyreferred to as a mortgage loan broker (MLB).3. What secures your investment?Your investment is secured by a deed of trustrecorded against the title of the borrower’sproperty (the Property). Unlike deposits in abank or savings and loan, which are generallyinsured by a federal agency (such as FDIC) andmay usually be withdrawn with limited notice,the promissory note: (1) involves risk to principal(a typical feature of all investments); (2)establishes a specific and predetermined periodof time for the repayment of your investment;and (3) does not benefit from insurance issued bya federal agency.In a deed of trust, the borrower (trustor) transfersthe Property, in trust, to an independent third party(trustee) who holds conditional title on behalf ofthe lender or note holder (beneficiary) for thepurpose of exercising the following powers: (1)to reconvey the deed of trust once the borrowersatisfies all obligations under the promissory note;or (2) to sell the Property if the borrower defaults(known as a foreclosure). Foreclosure involvesthe process of selling the Property to a third-partybidder or, in the absence of a sufficient third-partybid, acquiring title to the Property. The foreclosuresale, in most cases, satisfies the debt.Depending upon the method of foreclosure, thenature of the loan, the circumstances oforigination, and the value of the Property, youmay or may not be able to recover your entireTRUST DEED INVESTMENTS3
investment. For example, if a third party bids ata nonjudicial foreclosure sale an amount equal toor greater than the amount you are owed(including fees, costs, and expenses of theforeclosure), your investment would be fullypaid. On the other hand, if you bid the fullamount that is owed to you, including allforeclosure fees, costs, and expenses (full creditbid) and there are no third-party bids, you willgenerally be limited to the Property and its valueas the source of repayment of your investment.If the loan is a nonpurchase money mortgage (deedof trust) and the Property’s value is insufficient torecover all you are owed, a judicial foreclosurecoupled with an action for a deficiency judgmentmay be the only way to recover your investment;i.e., collect any difference between the amountreceived at the foreclosure sale and the amountof money the borrower owes you.Remember, the Property identified in the deedof trust is what secures your investment. Thisbrochure includes, in Section 2, a discussion ofwhat you should know about the Property.TRUST DEED INVESTMENTS3
SEVEN ESSENTIAL ELEMENTSOF TRUST DEED INVESTMENTSSeven Essential Elements1.Knowledge, experience, and integrityof the MLB through whom thetransaction may be made orarranged.2. Market value and equity in theProperty and the security for yourloan.3.Borrower’s financial standing andcreditworthiness.4.Escrow process involving thefunding of the loan or the purchaseof the promissory note.5.Documents and instrumentsdescribing,evidencing,andsecuring the loan or purchase ofthe promissory note.6.Loan servicing provisions, authorityand compensation.7.Recovering your investment whenthe borrower fails to pay.The information that follows will assist you inconsidering the seven essential elements of a loantransaction which you should understand beforefunding a loan or purchasing a promissory note. Justread on!4CALIFORNIA DEPARTMENT OF REAL ESTATE
1.Knowledge, experience, andintegrity of the MLB throughwhom the transaction may bemade or arrangedBefore placing your trust and money with an MLB,you would be wise to call: (1) the Department ofReal Estate (DRE) to determine if the MLB and hisor her loan representatives are properly licensed,how long each has been licensed, and whether anyof the licenses have been disciplined; and (2)the local Better Business Bureau to ask if anycomplaints have been lodged.Ask the MLB to provide a professional profile foryour review and information as to the approximatenumber and percentage of loans, if any, negotiated bythe MLB which resulted in foreclosure (commencedand/or concluded) during the past few years.Ask the MLB if he or she is the borrower or if he orshe has any relationship to the borrower (e.g., if theMLB is a relative, a shareholder, an officer, a director,or a partner of the borrower). When the MLB is theborrower or related to the borrower, we refer to thetransaction as “self-dealing.”2.Market value and equity of theproperty and the security for yourloanThe market value of the Property is critical to yourdecision to lend your funds or purchase a promissorynote because there is a possibility that the only wayto recover your investment is through the sale of theProperty. Therefore, the market value of the Propertyshould be correctly estimated and the total loan-tovalue ratio properly analyzed as illustrated below. Thisinformation should be made available to you beforeyou commit your money to the transaction.A. Market Value — The sale price, the cost to build,TRUST DEED INVESTMENTS5
or the value in use to a specific owner does notnecessarily represent the market value of theProperty. A market value opinion requiresconsideration of comparable sales and othermarket data by a competent professional.The market value conclusion may be presentedin the form of an appraisal report. While theborrower customarily pays for the cost of theappraisal report, either you or the MLB usuallyretain the appraiser’s services to prepare thereport, which should be reviewed by you inadvance of funding the loan or purchasing thepromissory note. You should make every effortto inspect the Property which will be thesecurity for your investment.B. Loan-to-Value Ratio — The total loans againstthe Property, including your loan, divided by themarket value of the Property determines the loanto-value ratio. For example, if a borrower has afirst deed of trust in the amount of 25,000.00and is requesting a second deed of trust in theamount of 40,000.00 and no other liens willbe placed against the Property, which is valuedat 100,000.00, the loan-to-value ratio is 65%( 25,000.00 40,000.00 divided by 100,000.00 65%).The lower the loan-to-value ratio and the greaterthe borrower’s equity, the more incentive for theborrower to protect the equity in the Property(i.e., sell or refinance the Property if unable tomake payments under your promissory note) orfor a third-party bidder to purchase the Propertyat a foreclosure sale. If the Property isoverencumbered (the total loans or other liensexceed a reasonable loan-to-value ratio orexceed the market value), the Property willprovide little or no security for your investment.A sufficient equity should be maintained in theProperty to allow for the fees, costs, andexpenses that you will incur in foreclosing ifthat becomes necessary.6CALIFORNIA DEPARTMENT OF REAL ESTATE
Note: The borrower’s equity is not the same asthe protective equity. The borrower’s equity isthe difference between the market value of theProperty and the total indebtedness secured by theProperty. The protective equity is the differencebetween the market value of the Property and thetotal indebtedness of loans senior to your loanand your loan, but does not include loans juniorto your loan.The existence of a lien junior to your loan willdiminish the borrower’s equity, increase theborrower’s payments or debt service, and reducethe borrower’s ability to refinance. In the eventof a default regarding senior loans (liens),beneficiaries who have a right of lien upon aproperty of another (lienors) and who are juniorare entitled to protect their security interest inthe Property by paying the borrower’sdelinquencies on senior liens and/or bycommencing their own foreclosure action.Therefore, junior lienors should keep informedof defaults in connection with senior loans(liens).C. Preliminary Report (PRELIM) — The MLB isrequired to provide you with the option to applyto purchase title insurance or an endorsement toan existing policy. The PRELIM, also known asthe Preliminary Title Report, is prepared by a titlecompany and is an offer to insure and does notprovide conclusive information about the statusof title.Title insurance companies offer different types ofcoverage. You should ask your MLB or the titlecompany from whom the report was obtained foran explanation of the different types of coverageavailable (e.g., CLTA and ALTA) and to whatextent you are insured.You should not consider a PRELIM as providingyou with reasonably current information unlessTRUST DEED INVESTMENTS7
it is dated within 90 days of yourexamination of the report. Therefore, youshould ask the MLB to provide an amendedand current PRELIM dated as closely aspossible to your commitment to fund a loanor purchase a promissory note.The current PRELIM should provide thefollowing information regarding theProperty:(1) The name(s) of theowner(s);(2) Legal description, street address (ifavailable), and the assessor’s parcelnumber;(3) Assessor’s plat map, which illustratesthe configuration, dimensions, andgeneral location of the Property;(4) Assessed valuation;(5) Existence and priority of liens andencumbrances;(6) The name of the owner(s) of existinglien(s); i.e., the owner of record of anydeed of trust (lien) which you may bepurchasing;(7) Requests for notices concerning statusof the liens, notices of default (NOD),and notices of trustee’s sale (NOS);(8) Notice of a lawsuit or bankruptcyaffecting the Property; and(9) Potential off-record interest of aspouse or other party.In reviewing the current PRELIM for theabove information, be alert to variousproblems which might affect the marketvalue and equity of the Property and thesecurity for your loan. If any of thefollowing issues are encountered, ask theMLB or a title officer for a fullexplanation.
(1) The borrower is not the owner, or theborrower is only one of the owners ofrecord, or a person other than theborrower has an unrecorded interest in(or claim against) the Property and doesnot execute the loan documents.(2) The ownership (estate) is other than feetitle (e.g., a leasehold estate), or thereis an exception noted regarding thedeed transferring title to the Propertyto the present purported owner ofrecord.(3) The Property does not have directaccess to a public road, has onlyeasement access, or is unusuallyconfigured.(4) There is a substantial difference betweenassessed and appraised value, or theassessed valuation does not includeimprovements while the appraisalreport includes both land andimprovements.(5) There are: (a) taxes, assessments, orassociation dues unpaid or delinquent;or (b) deeds of trust, judgment liens,claims, or bonds which may or maynot be discharged from the proceedsof the loan.(6) There is an NOD or NOS which willremain because the lien is not beingremoved by the proceeds of the loan.Note: A default may indicate that theborrower’s capacity and desire to repaythe loan is in question and/or that thesecurity for your loan may be impairedunless the notice of default or notice ofsale of the senior lien which is toremain is rescinded. See Section 7:Recovering Your Investment When theBorrower Fails to Pay.
(7) There are encumbrances remaining thathave not been explained orconsidered.(8) There are unresolved lawsuits andactive bankruptcies.(9) The owner of record of the deed of trustsecuring the promissory note you arepurchasing is other than the person fromwhom the purchase is being made.If you have any questions concerning thePRELIM, ask your MLB or title officer forassistance.3.Borrower’s financial standingand credit worthinessThe borrower’s ability to repay the loaninvolves the “capacity” and “desire” to makethe loan payments.The borrower’s capacity is measured by:income; job position and stability; and overallfinancial standing, including assets, liabilities,and net worth, and any profit or lossesincurred as the result of any business orinvestment activity. This information isreflected intheborrower’s“LoanApplication,” which may be accompanied bya “Financial Statement” if the borrower iseither self-employed or involved withsignificant business or investment activity. TheMLB must give you a copy of the written loanapplication and the credit report.To verify the borrower’s representations aboutcapacity to pay, you may examine:(1) Verification of employment;(2) Income tax records;(3) Verification of cash deposits or otherassets;and
(4) Statements from existing lenders reportingamounts owed (beneficiary or payoffdemand statements).The desire to repay is based on theborrower’s past performance in handling credit.To verify the borrower’s representations aboutdesire to pay, you may ask to review:(1) Credit report;(2)Reports providing payment history onexisting loans, including the number of latepayments (loan status reports); and(3) Credit references.When considering the borrower’s capacity anddesire to repay, you should ask whether theborrower has, immediately preceding therequest for the loan, borrowed a substantialamount of money. A significant amount ofconcurrent borrowing may indicate theborrower is experiencing difficulty meetinghis or her financial commitments. Extensiveborrowing may make it more difficult for theborrower to meet financial commitments.4.Escrow process involving thefunding of the loan or thepurchase of the promissorynoteYour funding of a loan or purchase of apromissory note should be transacted throughan “escrow.” An escrow is opened whenmoney, documents, instruments, and writteninstructions regarding the transaction (escrowinstructions) are conditionally delivered by theprincipals to a third party (escrow agent).The escrow instructions set forth the conditionswhich must be satisfied or waived before theescrow agent may disburse your funds to eitherthe borrower or the note holder. These conditionsinclude, but are not limited to: (1) removal ofcertain liens; (2) payment of delinquent taxes;
(3) execution and delivery of the promissorynote and deed of trust or execution and deliveryof the assignment or endorsement of thepromissory note and assignment of deed of trust(if you are purchasing an existing promissorynote); (4) selection of title insurance coverage;and (5) recording of the deed of trust orassignment of deed of trust concurrently with thedelivery of funds pursuant to the escrowinstructions.The information in the escrow instructionsshould be consistent with your understanding ofthe loan transaction. Compare the promissory noteand deed of trust with what you were told at thetime you agreed to make the investment. Beforeyou approve of the escrow instructions and loandocuments, make sure you have received anexplanation and you have understood that whichyou have been told.Both the promissory note and deed of trustshould state the name of the borrower and you asthe lender and note holder or the assignee orendorsee of the note holder. You should notdeliver your funds to either the escrow agent orthe MLB unless your instructions identify aspecific promissory note and deed of trust (orinterest therein).The escrow instructions should require thepromissory note and deed of trust be delivered toyou or an independent custodian on your behalfat the close of escrow. A broker is required todeliver, or cause to be delivered, conformedcopies of any deed of trust to both the investorand borrower within a reasonable amount of timeafte
the purchase is arranged by a real estate broker), a private party, depending upon the fact situation, may still be subject to usury. A broker who for compensation, or in expectation of compensation (regardless of form) assists the public in making or arranging loans is commonly referred to as a mortgage loan broker (MLB). 3.
Deed of Subscription and Gift ”). (B) The Parties now wish to amend and restate the Deed of Subscription and Gift in the form of this Deed, to reflect changes that have been made to the funding structure relating to the Offer (as defined below). This Deed supersedes and replaces in its entirety the Deed of Subscription and Gift, which is to .
THIS SECURITY TRUST AND INTERCREDITOR DEED is made as a DEED on the date of the Master Execution Deed and was amended by a STID AMENDMENT DEED dated 9 January 2012 BETWEEN (1) BAA (SP) LIMITED , a company incorporated in England and Wales with limited liability (registered number 06458621) (" Security Parent "); .
1 DEED OF SETTLEMENT THIS DEED OF SETTLEMENT (this “Deed”), dated and effective as of the 15thof June 2014 (“Effective Date”), is made BETWEEN 1. SANUM INVESTMENTS LIMITED (“Sanum”)of Avenida da Amizade, No. 1321, Edf. Hung On Center, 7
A ladybird deed, sometimes written as Lady Bird deed, is not a deed in and of itself. Rather, it is a term that describes a method of transferring real property by a warranty or quit - claim deed. Simply defined, a ladybird deed is a transfer of real prop - erty to a contingent grantee that reserves a life estate and the
Version 5 of Deed Plotter is distinguished by the name Net Deed Plotter. Note: (Released v5.50 in June 2013.) The design (programming) of Net Deed Plotter was on a Windows XP (SP2) based computer AND on a computer that used the Windows 8 operating system. In the Getting Started topic, you will see how easy it is to enter deed calls
and its sub-funds ("Sub-Funds"). The Fund is an open-ended unit trust established as an umbrella unit trust under the laws of Hong Kong by a trust deed dated 27 March 2015 ("Trust Deed") between HSBC Institutional Trust Services (Asia) Limited ("Trustee") as trustee and Baring Asset
canceling a transfer on death deed, and 3) creating an affidavit of death. WHAT IS A TRANSFER ON DEATH DEED?: A Transfer on Death Deed is a simple, inexpensive way to transfer real estate to someone else upon your death. It does not involve going through probate court, which can be a lengthy and costly process.
february 2021 page 1 date recept # deed description saleprice legal st address prop citygrantor grantee parcelno 2/1/21 354575 sp warranty deed 107,000 w2e2ne4 sec. 11 t14s r58w 11901 crd z.5 rush giebner charles, giebner vicki rocco david 331111100066 2/1/21 354578 quit claim deed 0 lots 10,11; blk 4; immel's first add town of limon, co.
