Chapter 10 - Deed of Trust Flashcards
Deed of Trust
- Same as a mortgage
- Borrower (Trustor/Grantor)
- Lender (Beneficiary)
- Neutral 3rd party (Trustee)
- Borrower conveys title to the trustee, to be held in trust until the note is paid in full
Bare/Naked Title
Title that lacks the rights and privilege’s usually associated with ownership
- Title given to trustee
Reconveyance or Release Deed
A document used to re-convey title from the trustee back to the property owner once the debt is paid
Deed of Trust - Power of Sale Clause
Allows the trustee to sell the property without having to go to court
Trustee
- Escrow Company
- Title
- Bank (Trust Department)
- Trust
- Corporate trustee is preferred
- Must be neutral
Assignment of Rents
-Establishes the lender’s right to take possession and collect rents in the even of loan defaults
- Allows the lender the opportunity to preserve the value of the property until foreclosure sale takes place
Foreclosure
Lender can instruct trustee to sell property in the event of the borrowers default
Trustee Rules
1) Lender must demonstrate that there is a reason to cut off borrower’s interest in property
2) A notice of default must be filed with the public recorder
3) The notice of default must be followed by a 90-120 day waiting period before sale advertising begins
4) Advertising of foreclosure sale must occur for at least 3 weeks in public places
5) The sale itself must be a public auction held in the county where the property is located
6) The purchaser at the sale must be given a trustee’s deed conveying all title held by trustee
- All right rights, title & interest borrower had at the time he deeded the property to the trustee
Automatic Form or Trusteeship
- The trustee is not notified of appointment until called upon
- Faster & Easier
Accepted Form
- Trustee is notified in advance and can either accept or reject appointment
- Positive acceptance
Customary Security Instrument
- State law recognizes power of sale clause in deed of trust, but not in regular mortgage
- Statutory redemption period may be required for mortgages, but not for deed of trust
Advantages of a Deed of Trust
- If borrower defaults, lender can take possession to protect it and collect rent
- Time between default & foreclosure is short (90-120 days)
- Foreclosure process under power of sale is cheaper and less complex
- Title is already in the name of the trustee, allowing trustee to grant title to purchaser after foreclosure sale
- Once sale takes place, there is no statutory redemption period
- Loans are easier and less expensive for borrowers to obtain
When a deed of trust is recorded, bare title is conveyed by the
Borrower to the trustee
In order for a deed of trust to be cleared from the public records, what documents are delivered to the trustee?
Request for reconveryance and promissory note
What security instrument is the most common form of security for a loan on rea estate on a nationwide basis?
Mortgage
If the trustor dies before a deed of trust is paid off, the debts…
would be an obligation of the trustor’s estate
If the trustee should die or be dissolved before the debt is secured by a deed of trust is paid off, the successor may be named by the…
Beneficiary (Lender)
A promissory note is not required to be given to the purchaser in what real estate method?
Land contract
When the debt is fully repair, under what financial instrument will the buyer receive a deed from the seller?
Land Contract
- With a mortgage or deed of trust, the seller delivers the deed immediately
Sara obtained a loan on real estate by means of an instrument which conveyed title to the property to a trustee. This instrument is a:
Deed of Trust
When a debt is secured by a deed of trust is fully paid off, title is reconveyed to the borrower by the:
Trustee
A borrower defaulted on the obligations of the his note which had been secured by a deed of trust. Upon request if the beneficiary, may the property be sold in order to secure funds with which to satisfy the indebtedness?
Yes, because the provisions of the power of sale clause
A difference between a deed of trust and a mortgage is that when the loan is made, the borrower…
conveys bare title to the trustee
Where trust deeds are used, their popularity may be attributed to
the time between default and foreclosure is shortened
Appointment of a trustee for a deed of trust is automatic form meaning
the trustee is NOT personally notified of the appointment
A real estate purchaser can agree to assume
either a deed of trust or a mortgage
