The definition of a lien priority may best be understood by explaining part of the mortgage process. A typical home has more than one type of lien. These can include judgment liens, mechanic's liens and the original mortgage lien that the owner has placed on the property.
Beginning in 2006, the economy of virtually every nation in the world was hit with a major economic downturn that impacted virtually everyone. In the United States, it has been called the Great Recession in reference to being one of the worst economic downturns since the Great Depression. As a result of this economic shock, the U.S. Congress enacted some sweeping legislation relating to lending laws generally and specifically towards loan servicing (as did the California State legislature). In light of these massive legal changes at both the federal and state level (more specifically, the Dodd-Frank Act and California’s Homeowner’s Bill of Rights (“HOBR”) Act), loan servicing by individual investors just became infinitely more risky.
In the real estate purchasing process, the preliminary title report is king. While it may not be the most exciting document you will ever come across when buying real estate, it is very important to know what this document contains. This report can be obtained by accessing the property records stored in the county where the property sits.
When investing in trust deeds, good old-fashioned due diligence is one of the key ways to mitigate the risk in such an investment. From reviewing the borrower’s credit report thoroughly to scrutinizing the appraisal on the subject property, a thorough review of all the documentation involved in trust deed investments goes a long way towards understanding your transaction better. Unfortunately, even the most thorough due diligence cannot guarantee that a payor or borrower will continue to perform per the terms of the note and trust deed for the duration of the loan. The most common problem with trust deed investments is when a borrower stops making payments. While the typical response is to initiate foreclosure proceedings, this can be both a time-consuming and costly process. Thankfully, there are other ways to attempt to keep your investment in good standing before foreclosure has to be considered.
When there is money to invest, it can be tempting to gravitate toward investments which promise a quick return or which are advertised everyday such as stocks and bonds as well as the stock market generally. But there are other investment types which can also yield an impressive return on investment such as trust deeds. However, when trying to weigh the two, it can be difficult to determine the differences between them, and ultimately make an educated decision about which type of investment is best for your investment dollars. Trust deed loan brokers can assist you make that educated decision about how trust deed investing can be part of your investment portfolio.
In this era of the Dodd-Frank Act of 2010 and mortgage lending reform, many trust deed brokers, investors and indeed the general population are uncertain over the future of trust deed investments on loans secured by personal residences and what these new lending laws will do to mortgage lending in general. Indeed, most media reports and other descriptions of the new Dodd-Frank laws are filled with negative news making it sound as though the entire $14 trillion US mortgage industry will come to a halt.
The present-day lending environment has made borrowing more difficult. Lending Regulators are getting rigorous when it comes to requirements as well as lengthy in their turnaround. The bar has been raised for those who desire conventional funding and unfortunately, not everyone is able to reach these new levels to qualify.
Trust deed investments are those wherein an investor makes a private loan to a borrower who uses his or her property as collateral for the loan. In the context of trust deed investing, the legal title of the property being used as security is transferred to a third party trustee. The equitable title of the property remains in the borrower’s possession. If for some reason the borrower defaults on the loan, the trustee can turn around and foreclose on the property and recoup the investor’s money through a trustee auction. Once the property is auctioned off to the highest bidder, the investor receives the funds and the new owner of the property receives both the legal and equitable titles to the property.
Hard money loans, also known as private money loans, are one of the most advantageous means of investing money these days, especially because there are plenty of borrowers out there who cannot source loans through traditional means. However, while hard money loans, including trust deed investing, are great options for both borrowers and investors, it can be difficult for a real estate or loan broker to find a reputable and dependable hard money or private money lender to work with in the area. Without the right company on your side, it can be next to impossible to facilitate a hard money loan that is beneficial to the borrower.
Hard money or private money loans are geared towards borrowers seeking short to medium term loans who have a poor or adverse credit history, or those who cannot meet the strict underwriting requirements of most banks for income and/or assets. They can only be sourced through private money lenders and are secured on the basis of a specific piece of real estate. When a hard money loan is made, the borrower agrees to give the private money lender a lien on the real estate, which is pledged as collateral for the loan. Hard money loans are becoming more common these days, and the market is truly flourishing. There are a number of reasons for this change with the main ones being: