Q? IS 1ST TRUST DEED INVESTING VERY RISKY?
Trust Deed Investing is a proven investment concept, but more prevalent in today’s economic environment because real estate prices have come down significantly. It’s a tested, fundamental investing strategy that allows investors to earn exceptional returns without assuming any unnecessary risk. SAM investors always have protective equity of 35% or higher, thus making the investment conservative with low risk to capital.
Q? WHAT IS A DISCOUNTED 1ST TRUST DEED (NOTE)?
Trust deeds and notes are legally binding contracts secured by real estate. The document records the promise to pay funds borrowed to buy houses, buildings or vacant land and records the contracts amount of funds borrowed, interest rate, and person responsible for payment. The term discounted simply means that the seller is willing to take less money than the face amount of the note. IE: If the face amount of the real estate note is $100,000 dollars and an investor buys it for $80,000 dollars the discount = $20,000 —- Discounted trust deeds and notes are created when the holder of the first trust deed or note finds that life situations change and wishes to have access to the cash from that real estate note. When these discounted trust deeds and notes are put up for sale, private real estate and trust deed/note investors can take advantage of these opportunities for a higher return on investment. Today several Banks, Financial Institutions, and private investors will sell their notes at a Discount.
Q? IS MY INVESTMENT A WIN/WIN FOR THE HOMEOWNER AND I? IF SO, PLEASE EXPLAIN.
Yes, it is a win/win investment. Summerlin buys a discounted mortgage for an amount far less then what the borrower owes. Therefore, we can offer the borrower a principle write down, or cash for a deed in lieu of foreclosure agreement. These are all beneficial to the investor as well as the home owner (borrower).
No, buying a 1st mortgage is very similar to buying a home. The transaction is recorded by a licensed title company and two federal banks govern the purchase, sale, and disposition of our mortgage assets. US Bank is the legal custodian of all original documents, so they work with Summerlin and Stewart title to insure operational transparency. You can view this recording over the internet.
A mortgage is defined as a temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt. Furthermore, a mortgage is a loan secured by a property/house and paid in installments over a set period of time. The mortgage secures your promise that the money borrowed will be repaid.
Q? AT WHAT POINT DO I START THE FORECLOSURE PROCESS IF A BORROWER HAS DEFAULTED, AND HOW LONG DOES FORECLOSURE TAKE?
Foreclosure is our last option. We offer several options to the borrower such a “deed in lieu of foreclosure”, we can offer the borrower “cash for keys”, and we can offer the borrower a principle reduction. If all of our options fail, then we will start foreclosure. SAM is very careful to only buy 1st mortgages in states where Foreclosure is expedited. Foreclosure takes 4-8 months depending upon what state the property is in. Please ask SAM management for more details.
Deed in Lieu of foreclosure is where you deed your property to the lender in exchange for being forgiven the entire amount of the mortgage. The lender then sells off the property in order to retrieve as much of the unpaid mortgage amount as they can. If you choose to try for a deed in lieu in order to avoid foreclosure, you need to sign several legal documents such as the Agreement in Lieu of Foreclosure and a deed. The first document sets out the terms and conditions of the deed-in-lieu, and is signed by both the lender and borrower. The second document, which is the deed, conveys legal ownership of the property to the lender. The lender marks the borrower’s note as “paid” and provides the borrower with two documents – one which states that the debt is canceled and the other waives the lender’s right to a deficiency judgment (the lender’s right to ask for the amount of the debt they are unable to recover from the sale of the home). The agreement for deed in lieu of foreclosure is executed through an escrow company which receives the borrower’s note (marked as “paid”) from the lender. The escrow then records the deed in the property’s file at the county recorder’s office and sends the note to the borrower, releasing the borrower from all obligations under the mortgage.
A classic example of a cash for keys offer, the 1st mortgage owner will initiate the foreclosure process on a home, and indicate that it is willing to pay the homeowner a set amount of cash in exchange for the keys. If the homeowner accepts, ownership of the home reverts to the mortgagee, and a moving date is set. This benefits the mortgage holder because the borrower moves out immediately, and the defaulted borrower gets some money to move out.