Chapter 9

 

Loan Documents

 

 

There are different loan documents that secure an investment.  However, regardless if you are loaning money on real property as security, or are investing in a deed of trust, the documents you would require for both are the same; you would require the trust deed and the note.  The trust deed is what will secure the repayment of funds that are owed according to the conditions of the note, and will then become a lien on the property.  The note, on the other hand, shows the initial amount that is owed based on the terms and conditions regarding the repayment of the trust deed.

 

While all notes function with the same end in mind, there are different types of notes that can be obtained.  The following is a list of notes:

The Promissory Note – This is a common note, and as the name suggests, it is the borrower’s written promise that they will pay a specified amount of money, installments of money, or money on demand to a named person, in the future, at any given time.

 

The Amortized Note – the amortized note is often used for real estate transactions.  It requires that the borrower usually make regular monthly payments of interest and principal throughout the period of the loan.

 

A Holder in Due Course Note – This particular note is in reference to an individual who is the innocent buyer of the note for value, and was oblivious to any defects that existed within the note when purchased.  The holder of this not is protected by the law, as they are considered to be in good faith holding this negotiable note.

The Straight-Interest-Only Note – The straight-interest-only note, is one that does not require payments of principal during the life of the loan.  The interest payments are considered negotiable, but generally they occur as monthly payments.

 

Recourse Note – For this note, the endorser is making a guarantee that the payments will be given to the present holder, as well as all the other holders.  That being said, a person may choose to recourse a note so that the payment goes to one individual in particular and no one else.  As an endorser, one should be cautious when using this note, because the payment liability is extensive.

 

Note Without Recourse – If this note is written above the signature it implies that future holders will not be guaranteed payments.

 

The Demand Note – This note is used only on special occasions and is subject to be called in at any time for full payment.

 

An “or more” Note – some notes feature an “or more” clause that is located near the payment amount.  This “or more” clause enables the borrower to rightfully increase their monthly payments when they choose, as well as the right to fully pay off the loan without being subject to penalty.  However, if both parties involved in the loan agree, the “or more” clause can be deleted by simply having an escrow agent omit the objection.

 

Information Regarding Notes

 

You need to understand that while some notes can be negotiable, others are not.  In order for a note to have negotiability, the note must have the option of unconditional promise to pay, without contingency, which is based on the future actions of the borrower.   A negotiable note must provide a set sum of money for the payment at a specific time, and must be payable to the holder.   However, the vast majority of notes are transferable through endorsement.

What if a note is lost?

If you lose a note, it will need to be replaced.  The reason is because the original note is not a recorded instrument, like the trust deed.  Thus, even if you have a copy of the original, it will not suffice because only the original note is considered to be the life of the transfer.  Losing a note is a problem that is also quite costly.

 

The best way to replace a note is for the two parties to come together and sign a new note.  If this action can not be performed, it may become mandatory that you seek the service of an attorney.  An action must be filed in court to reconstruct or restore the lost note.  Although, in some cases, depending on the state, sometimes the issue of a lost note can be resolved by means of a lost note affidavit.

 

In order to keep your original note and deed of trust safe, you should place them in a safety deposit box at your bank.  However, make sure you make copies of both documents, so you can have them on hand, and refer to them later for future use.

 

Construction Loans

 

There are different construction loans that can be invested in.  For instance there are:

 

Improvement and Renovation Construction Loan – this loan is funded to enhance the value of property based on upgrades and modifications.

 

Ground-up Construction Loan – This loan is one that assumes the borrower has approvals and a completed set of plans which are sufficient so that construction can begin once the loan has been funded.  With a lender approved draw schedule, the proceeds of the loan may be funded over a certain amount of time.

 

Infrastructure Construction Loan – The proceeds for this loan are used to give the borrower the chance to develop and complete the infrastructures of the property, prior to the start of ground-up construction.  The use of such loan proceeds can fund the installing of utilities, water pipers, sewers, streets, gutters, curbs and related utilities.

 

With a construction loan, there are certain aspects that must be followed to ensure that everything goes according to plan.  For instance, the lender needs to consider inspections and lines.

 

Inspections to Protect Investment – It is imperative that frequent inspections are conducted in order to protect the lenders investment.  This protection is made possible by the coordination of project funding with the lender.  Through reviewing and maintaining plans, as well as specifications that are relevant to jobs.  Furthermore, contracts are reviewed to make certain that borrowed funds are sufficient to complete the project.

 

With this type of documentation at their disposal, the company in question can have complete control and account for construction funds from the start of the project until completion.  Routine inspection reports of the construction site are prepared by an in-house inspector.  This report details items that have been completed and are still under construction.

Preliminary Lien Notice – With a construction loan, most states will require that a preliminary lien notice be sent to the lender, general contractor and owner before, or on labor services or material provided by the subcontractor/material supplier.  Once this notice has been sent, the subcontractor has been given the right to lien a project.  A construction control company that is well managed will ask each party involved to send their copies of all notices.  The purpose of this procedure is so that those who supply the services and products, as well as those who are the subcontractors working on the project, can be tracked.

 

Finally, when it comes to a construction loan, construction control is imperative to any construction project.  Prior to the hiring of a control company, its disbursement policies must be looked into.  You need to understand that not every company functions the same.  For instance, while some companies will consider themselves control companies, the actually disburse the funds directly to the owners or general contractor, without first making certain that the subcontractors and material suppliers have been paid.  To be on the safe side, it is always in your best interest to ask whether or not a construction control company is used.

Chapter 8

Lien Priority

 

 

You may or may not be aware, but a deed of trust is actually a lien on a piece of real property.  What is a lien?  A lien is a legally recognized claim or hold against one person’s item by another which utilizes this item as security for a duty, debt or obligation.  If there is more than one lien on a piece of real property there could be a number of reasons for this.  Some of the liens an investor may encounter include:

®         Tax liens

®         Mechanic’s liens

®         IRS liens

®         Judgment liens

®         Etc.

 

A few interesting facts about liens

It is important for you to know that liens in first priority are the most ideal.  Therefore, in order to obtain this priority, this needs to be verified before the closing of escrow.  In order to obtain the accurate information that is required to verify the priority of the deed of trust, you will find that Title insurance policies will provide you with what you need to know.

 

If it happens that an error is made, or a lien has been overlooked and such aspects affect the trust deed holder, then the holder can take legal action against the company that issued the title insurance policy.

 

When the holder is in possession of the priority lien, they can foreclose and any junior lien holders won’t be able to stop it.  That being said, there are ways in which junior lien holders can protect themselves should this happen.

 

To begin with, they can make certain that their lien has been accurately recorded with the county recorders office.  They can also inform all senior lien holders about their lien, and ask them for written notification before they foreclose.

 

 

Tax Liens

Tax liens have priority over deeds of trust.  This is a fact you won’t want to forget should a tax lien appear.    Thus, in order for the investor to protect themselves in the event of a tax lien, a provision should be added in the trust deed and note that explains if the borrower and their property have or will receive a tax lien; it is the trustor’s responsibility to contact the investor.

 

In addition, the note should provide the investor with the choice of needing the payoff, so that they can protect their principal from foreclosing on the tax lien.

Chapter 7

Collection and Distribution of Loan Payments

 

Loan servicing provides a great service to investors, because it allows a third party servicing officer to collect on a trust deed and a note on behalf of the investor.  Not only is this an efficient means of collecting on a trust deed and a note, but it is more beneficial to the investor when there is a third party involved in the note and deed of trust, because the borrower simply has to make a single payment out to the servicing officer, instead of payments to multiple investors.

 

The reason why this is beneficial to the investor is because the borrower is more likely to meet payments and not cause problems.  Thus, when an investor makes the decision to involve a third party that is well established and reputable, the higher the chance that the borrower lives up to their end of the bargain as far as the loan is concerned.

 

Third Party Benefits

When a third party is involved, it becomes the loan servicing department’s responsibility to bill the borrower for regular monthly payments.  It is also their responsibility to enforce on the borrower the loan agreement terms, so they respond in a proper and timely manner.

 

There is no question that some borrowers will do everything in their power to try and avoid and delay making payments.  Borrowers that create this type of problem can often be extremely difficult for an investor to deal with, especially if the investor is new to private money lending.   That being the case, it is in the investor’s best interest to loan through a third party that has the experience to deal with problem borrowers.

 

The third party separates the investor from interaction with the borrower, relieving them of burdens and hassles which helps the investor feel more secure in their investment because the loan process is likely to run smoother.

 

Borrowers know that when they receive a fast response from the third party in regards to their lack of payment, that the loan servicing department has zero tolerance for such behavior.  Furthermore, in-house counsel will start foreclosure within 24 hours after a default has occurred on the loan.  Therefore, borrowers will do everything they possibly can to avoid foreclosure, as it is extremely costly to them, and has the potential to damage their credit.

 

A Third Party Produces Excellent Results

 

It is through strict and constant enforcement that reliable payment and performance is maintained.  It is not uncommon for a borrower to try and convince, or pressure a lender to give some slack in regards to terms and due dates for payments.  With a loan servicing department, a borrower knows that such possibilities won’t happen, and that no other agreement will be tolerated save for the initial one that was created when the loan was issued.

 

Loan Servicing

 

The following is how a typical loan service is conducted.

Each month, the loan servicing officer bills the borrower and collects payment, depositing the funds that are received into the account of the investor.

Once the payment has been received in full, and the funds are cleared, the loan servicing officer will then begin to issue the appropriate checks to the investor(s) involved in the loan.

At the same time every month, statements and a check that covers the interest earned throughout the month are mailed to the investor(s).

The servicing agent maintains the payment records, and for tax purposes, the investor will receive a 1099 form.

If there is a default on the loan, the loan servicing officer may choose to start foreclosure.

Should there be problems during the foreclosure, or should necessary negotiations need to take place during the process, in-house legal counsel is waiting to offer assistance to the investor.

Lastly, should the foreclosure be stalled or halted by a borrower’s bankruptcy petition, the in-house legal counsel will immediately try to relieve the stall or request the bankruptcy court provide sufficient protection.

 

As you can see, using a third party when investing in a deed of trust acts in your best interest, and is something you should seriously consider before you decide to make a trust deed investment.  And remember, make sure the loan servicing company you choose has experience, integrity and a good reputation.

Chapter 6

Title Insurance

Title insurance is quite different from other types of insurance.   Why?  Because unlike other forms of insurance that provide coverage for unpredictable occurrences that could possibly happen in the future (such as life, health or casualty insurance), title insurance protects the party insured from loss that results due to events that happen before the effective date of the title insurance policy.

Another important difference is that title insurance is a single premium product.  This means that the buyer pays a one-time only premium for the lenders benefit on the day the policy is issued.  The amount of the title policy premium is based on the amount of money that is being insured by the loan.  A trust deed investor always needs a title insurance policy.

How to obtain title insurance policy

A title company will open a standard insured loan transaction, and will research the property.  When it comes to researching the property, the title company will begin from the time the government conveyed the property, and then move on to the original private owner, and continue on until the title company reaches the most recent record within its database.

Once the title company has finished its examination of the property, the title agent will then share the results of the research with the investor, revealing the title condition.  The report that is conducted by the title company is known as a preliminary report or a prelim.  The prelim is created from an itemized list of exceptions (title facts).

When it comes to preliminary reports, the most common exceptions include:

®         Casements for a variety of purposes

®         Real property taxes

®         Any mineral uncertainties or the right to examine for them

®         Covenants

®         Any encumbrances or liens that presently affect the property

®         Restrictions and conditions better known as CCR’s.

Policy Types

Although there are different title insurance policies, the most common ones that are used today are:

1.      American Land Title Association (ALTA) – This policy is generally issued to a lender who holds a deed of trust in first position.

2.      California Land Title Association (CLTA) – This policy is generally issued to a lender in second position, or to the purchaser of a property.

What is insured by policies?

Although it may appear that each title insurance policy listed above appear similar, that ALTA policy is recognized as being far superior to the CLTA policy.  The reason is because ALTA provides a broader range of coverage compared to CLTA.  However, despite their differences, each policy works to insure some the following (Note:  The list below is only a small sample of the insurance provided by these two policies):

The deed of trust that is insured is recognized as a valid an enforceable lien.

No defects, encumbrances, or recorded liens appear on the title.  All that appears is what is displayed within the policy.

The right of access to and from the property

The title to the property is made marketable

Any assignment of the trust deed that is displayed in the policy is valid and enforceable.

Even though each policy works in the best interest of the investor, ALTA is still considered to be the best choice among the two, and is something you should keep in mind when selecting a policy..

Endorsements

Endorsements are very similar to the riders found in a variety of other types of insurance, and they provide coverage for precise issues that are not covered in the pre-printed title insurance policy.

Title insurance, and the process that is associated with the creation of a title insurance policy, provides the investor with an in depth examination of the property title and everything that affects it.  Ultimately, title insurance gives the investor reassurance that they are involved with a safe investment.



Chapter 5

Loan Underwriting

 

The underwriting discipline of the lenders is one of the single most important elements when investing in a trust deed.  The reason why loan underwriting is so significant to trust deed investing is because part of the underwriting process is to determine the Loan-To-Value Ratio (LTV).

 

The process of underwriting is what the lender goes through in order to qualify a borrower for a loan, and also makes certain that the loan has been properly documented and structured.  The LTV if often determined though the comparison of the loan amount to the appraised value regarding the collateral that secures the loan.

 

Throughout a loan transaction there tend to be far fewer problems when a loan has been properly underwritten.  However, if problems do arise, the borrower is encouraged to set them right should they wish to protect their equity in the project.  Almost any problem can be rectified; it’s only a matter of money.

 

In the event that the borrower fails to solve their problems, regardless of the reason, the loan’s margin of equity proves to be helpful as it enables the lender to absorb the cost to solve whatever problems have occurred.

 

Loan-to-Value

 

 

The loan-to-value principal is what makes carrying a high yield with a trust deed investment secure.  The reason is because LTV means to loan a percentage of money that is less than the actual property value.   When it comes to real estate lending, LTV is the single most important element, because an adequate LTV protects the initial investment, while a remaining cushion of equity helps to pay off any unexpected costs that may occur.

 

When it comes to loan-to-value ratio, the goal of an investor should always be to try and keep the LTV at the lowest possible amount.  For instance, a good rule of thumb that every investor should follow is to never have an LTV higher than 70%.  Remember, the lower the number, the more equity the investor will receive on the property.  For the most part, when lenders need to analyze a loan situation, they generally rely on appraisals in order to determine their loan-to-value ratio.

 

Borrowers

 

Another important aspect of the underwriting process is finding out how the borrower intends to refinance the loan in regard to the loan terms that have been specified in the promissory note.  Typically, a lender should want to conduct business with a borrower who has a decent record.

 

The following is information the lender should take the time to find out about the borrower before distributing a loan, so that the loan can be underwritten accurately.

The address of physical property description.  This includes the square footage of the land, the description of the building(s) or improvements, operating statements, rent rolls and income property.

The property preliminary title report

If it is a purchase, find out the purchase agreement

Confirmation of the zoning letter issued by the city/county that confirms the zoning for the property.

The corporate papers of the borrower

Phase one environmental report

If the loan happens to be funding a construction or rehabilitation project, the lender will also want to obtain the following criteria:

Breakdown of the construction cost

Agricultural and engineering plans that have been fully approved’

Description and site plan of buildings/improvements on the site

Chapter 4

Legal Issues for Investors

When you invest in a trust deed there are certain legal issues that you need to consider.  Regardless if you secure your trust deed investment through a single lender (whole) or by more than one lender (fractionalized), you will still need to follow certain rules and regulations as stated by real estate law.

Real Estate Law

 

The Real Estate Law includes what is commonly referred to as the “multi-lender law”.  This multi-lender law has certain restrictions which it can impose on the investor.  Some of these laws include, but are not limited to the following:

®         The investor must have their loan serviced by a mortgage loan broker (MLB) and have a written agreement.  Furthermore, the investor and the MLB need to arrange for a third party to take part in loan servicing.  The third party should be a qualified, licensed real estate broker.

®         A loan can have no more than 10 note holders or lenders.

®         The investor is not permitted to invest more than 10% of their annual income or net worth

®         Based on the type of property that is considered collateral, defined loan-to-value ratios are not to be exceeded

®         Only under limited circumstances is the MLB allowed to “self-deal”.

®         The investor’s loan is not permitted to be indirectly secured though any other deed of trust or promissory note, and is only secured directly through the property.

TILA – Section 32

 

Aside from the Real Estate Law, you may find that your loan documents will feature another legal document known as the federal Truth-in-Lending Act (TILA).  The TILA was amended in 1994 and was created in respect to loans that are secured by a borrower’s principal property.  The rules of the TILA affect all mortgage transactions that are described as having fees or rates that are above a specific amount or percentage.  Such mortgage transactions are known as “high rate/high fee” or “Section 32” loans.

 

A loan that is considered to be high rate is one where the appraisal exceeds ten points on the Treasury Security yield that has similar development.  A high fee loan, on the other hand, is one where the total fees and points are greater than 8% of the total loan amount.  If you have any questions concerning the TILA, you can contact the Federal Trade Commission, as the TILA regulations are enforced by them.

 

As you can see there are many legal issues for investors to consider before they invest in a deed of trust.  Make sure you understand all legalities concerning trust deeds before you make your investment.

Introduction

Today there are a number of ways in which investors can invest their money.  From the stock market to savings bonds to deeds of trust, there is something for every investor looking for a way to grow their money.  While most investments are made with the same end in mind, the main difference between each investment type are the strategies and the level or risk involved.

 

However, although there is always some degree of risk involved when making an investment, trust deeds happen to be one of the safest investments available today, because unlike other investments, a trust deed is secured by actual property – homes, buildings and land.

 

Aside from the security of real property, with a trust deed investment, the other advantage is the investor receives higher than average rates of return.  This is due to the fact that borrowers are willing to pay a higher interest rate because private investors are flexible with their loans, as they are not limited by traditional rules of bank loans.  Without the constraints of such rules, private investors can provide quicker loans that do not follow the same rules as is required for traditional lending.

 

Furthermore, deeds of trust are safe investments because borrowers are generally a good risk to take.  The following are two excellent reasons why:

1. The borrower could loose their property (home, land, etc.) if they fail to pay the loan.
2. If the appropriate research has been done, the investment will have a more than sufficient loan to value (LTV) ratio.  In other words, the loan amount is exceeded by the real property value.

 

Why do I want to get involved with trust deed investing?

At some point in your life you will retire, and like many other investors out there, you may be thinking about investing as part of your retirement plan.  Trust deed investors who invest for their retirement agree that it is the best investment they can make, because a trust deed can earn 10%, which is as much as 5 times more retirement income compared to other investing methods such as a savings account which on average pays between 2-4%.  Furthermore, investing in trust deeds for your retirement is safer than running the risk of being stuck in a low yielding mutual fund, or a bad stock.

 

Another reason to consider is trust deed investors that plan for their upcoming retirement (whether it is IRA, KEOGH, etc.), know that by compounding an annual 10% interest  through trust deed investments, they have the chance to take years off the necessary time required to reach the target date they have personally set for their retirement.

 

Need further proof why trust deed investing is the better way when it comes to making an investment for your retirement plan?  Take a look at the following examples:

 

Retirement plan without a trust deed investment

Mary places $500.00 in her IRA at 2.5% compounded annually.  After 20 years, the $500.00 would become $819.31, paying approximately a $17.00 annual retirement income to Mary at 2.5% (Note: This is calculated by using any handheld calculator.  Begin by taking the percentage, in this case 1.025 [1.025: 1 = the single deposit of $500.00 and .025 = the 2.5% annual yield.] and multiply this number by $500.00.  Tap the equal button 20 times in order to compound the 20 years.)

 

With a Trust Deed Investment

James places $500.00 in a 1 year trust deed investment that pays 10% compounded annually.  After 20 years, the $500.00 would become $3363.75 paying approximately a $150.00 annual retirement income to James at 10%. (Note:  this is calculated by using the same method as the previous example, except that the 10% is calculated as 1.1 [1.1: 1 = the single deposit of $500.00 and .1 = the 10% annual yield.]

 

By comparing the above two examples, James’s trust deed investment provided him with approximately 15 times more retirement income!  Now that’s a difference worthy of your attention.

 

In addition, there are a number of other bonuses related to trust deed investing that you may want to keep in mind before choosing just any type of investment. Here are a few of the basic advantages that investing in trust deeds offers you as an investor:

1. The interest rate paid by the borrower is typically higher than rates paid by banks.

1. Investing in a deed of trust generates a monthly income that is established through interest payments.

1. Trust deeds can be traded

1. Trust deeds sell fairly easy because they are liquid

1. When you invest in a trust deed, every month that goes by increases your protection because the loan amount continues to be lowered by amortization.

The more you learn about trust deeds, the more you will discover that this investment offers you a high rate of return at a risk you can afford.

 

The purpose of this book – Trust Deed Investing– is to provide you with the fundamentals of trust deed investments.  Within its pages you will discover all of the essential aspects that are required in order to make investing in a deed of trust a secure and safe risk taking experience.  Some of the topics you will find include the different methods for investing, loan underwriting, title insurance, lien priority, escrow and much more.

 

This book has been designed to give you a good idea of the many golden opportunities that await you should you choose to invest in deeds of trust.  With all of the knowledge you will obtain from Trust Deed Investing, you will gain the confidence you need to know how to protect your investment, choose the right broker and provide an excellent product with the least amount of risk.

Chapter 3

Typical Borrowers

 

There are a number of reasons why borrowers require private money loans.  Some of these reasons could be, but are not limited to the following:

Borrowers that need money quickly

Borrowers who have lost bank loans because of excessive conditions, declines or any other reason

Borrowers who do not want to waste their time undergoing the hassle of processing an institutional or bank loan

Borrowers interested in ground up construction

Borrowers who need a loan that has flexible conditions

Borrower has the opportunity to gain investment by utilizing the equity in their real estate.

Borrower is a non-profit organization (ex: churches, charities, etc.)

Borrower is in unfortunate circumstances that make it difficult for them to obtain bank assistance, circumstances such as:

®         Poor credit

®         Bankruptcy

®         Irrevocable Trusts, etc.

®         Tax Liens (estate, federal and state taxes, etc.)

®         Other Liens (property taxes, judgment liens, etc.)

®         Receivership or Foreclosure

®         Property held in Trusts, Probate, etc.

®         Divorce

®         Unemployment

®         Medical emergencies

®         Etc.

Borrower has property with certain characteristics that make it difficult for them to obtain a loan from the bank, characteristics such as:

®         A high vacancy-loan is required to increase the occupancy of the income property

®         Partial construction of building or near completion

®         Seismic retrofitting

®         Property improvements

®         Etc.

Chapter 2

The Basics of Trust Deeds

At this point you know that a trust deed is one of the safest investments you can make that offers you a high return, but what exactly is a trust deed?  A trust deed, or deed of trust is a document that is used to secure the debt on a home acting as a mortgage.  A trust deed is recorded as a lien on real property.  However, although a deed of trust acts like a mortgage, it is important that you understand there are differences between a mortgage and a deed of trust.  These differences will be discussed later on in this chapter.

A trust deed is used as security for a loan on real property, and the specifics regarding the loan are written in a promissory note.   A deed of trust is then documented at the county recorder’s office to legally notify the world that the property in question has now been pledged to secure a loan.

There are three parties involved in a trust deed:

1. Beneficiary – Investor/Lender/note holder

2. Trustor – Borrower

3. Trustee – Third party selected by the investor who has the legal power to act on the investors behalf and hold title until the note has been paid.

What secures a trust deed investment?

When making a trust deed investment, the deed of trust recorded against the borrower’s property title is what secures the lenders investment.  When making an investment in a deed of trust, the trustor (borrower) makes the property transfer, in trust, to the trustee (independent third party).  The trustee then holds the conditional title on the behalf of the beneficiary (investor/lender/note holder), and then either of the following takes place:

1. The trust deed will be returned to the borrower once they satisfy all of the terms and conditions that were outlined in the promissory note

1. The property will be put up for sale should the borrower default – also known as foreclosure.  Foreclosure is the process that is taken by the investor in order to sell the property to a bidder from a third party, or to obtain title to the property.  Usually the foreclosure sale satisfies the debt that is owed to the investor.

The difference between trust deeds and other investment types

What is the difference between a mortgage and a deed of trust?

The following are the basic differences between a mortgage and a deed of trust:

® Only two parties are involved in a mortgage document – the lender and the borrower.

® Three parties are involved in a trust deed – the lender, the borrower and the trustee.

® With a mortgage document foreclosure the state law will determine the foreclosure method that will take place, which can sometime involve a lengthily process.

® A deed of trust usually involves a quicker foreclosure, because the most common type of foreclosure is a non-judicial one.

The different between investing in a deed of trust and the stocks

® The value of a stock fluctuate hourly, and sometimes by the minute.

® The value of a deed of trust is fixed and is always stable.

® An owner of stock is in third lien position.

® The owner of a trust deed is generally first or second in regards to the lien position.

® Every stock investor is charged a fee from their stock broker.

® A trust deed broker often charges investors no fees.

® Stocks can be purchased and sold through brokers.

® Trust deeds, on the other hand, are purchased and sold through brokers, but can also be purchased and sold privately at no extra charge.

® The security position of the stock owner is shared among thousands of other holders.

® The security position of the owner of a trust deed is not shared with anyone.

® A is supported by conglomerate properties and equipment that are often from foreign countries (ex. warehouses, factories, port facilities, mills, ships, etc.).

® Deeds of trust are only collateralized by real estate that occurs within the U.S., and usually by homes that are within the local area of the investor.

® A stock is a gamble.

® A trust deed is an investment

Although it is evident that there are many differences between trust deeds and other types of investments, one thing is for certain – a trust deed is an investment opportunity that offers you a high return with less risk.

Chapter 1

Cal Western Investment Funding

Cal Western Investments, is one of California ‘s leading sources of non-institutional, short term real estate loan providers, is a dynamic and professional company that specializes in providing real estate loans that are not usually obtainable by conventional lenders.  In short, Cal Western Investments provides lending investment opportunities known as a Trust Deed.

The funds for these short term loans that are  provided by Cal Western Investments, come from a variety of sources that include, but are not limited to, individual investors, hedge funds, pension plans, trusts, IRA’s, and REIT’s.    This type of lending that is provided by Cal Western Investments is commonly referred to as hard money or private money lending.

What is private money lending?

At this point you may be asking yourself: What is private money lending?  Private money lending refers to loans that have been collateralized by real estate, and are made in regards to the decision of making a loan that is based mainly on the protective equity within the property.

Private money loans are required by borrowers, who fail to meet guidelines set up by conventional institutions such as banks, life insurance companies and conduits.  The guidelines regarding the main credit decisions of such institutions are based on the borrower’s income and credit.   Thus, from a lenders perspective, while providing a loan may seem like a sensible transaction, due to the fact that it’s classified as subprime, it requires private money lending.

Cal Western Investments underwrites, solicits, processes and funds private money lending, and is extremely reliable because they have more than 25 years of experience in real estate lending.  They are experts in their field, and provide creative financing solutions because they know how to deal with, and understand complex transactions.

Their creative skills give Cal Western Investments a unique advantage over other lenders, because they provide direct loans that are underwritten.  In other words, instead of outsourcing to obtain their information, Cal Western Investments personally determines inherent risks regarding specific loans, and establishes appropriate terms and conditions for the loans which they fund internally.   This allows them the ability to approve and fund loans within hours or days of a submitted application.

Cal Western Investments and Trust Deed Investing

Cal Western Investments provides investors with many unique opportunities to invest in trust deeds.  The loans provided by Cal Western Investments are first secured with deeds of trust on real estate, and in addition are supported with the borrower’s personal guarantee.  All deeds of trust are insured by a reputable Title Insurance Company that is recognized nation wide, and all costs that are related to underwriting, documentation and servicing of the loan are paid by the borrower.

An asset based lender, Cal Western Investments, primarily bases their decision on whether or not to provide a loan based on the amount of equity in the property.  If the property meets their equity requirements, Cal Western Investments will then carefully analyze the borrower’s personal characteristics, as well as their ability to repay the loan, and the project viability.

Before a loan is granted, a Cal Western Investments officer will perform a personal inspection of all subject properties.  Furthermore, Cal Western Investments will never fully rely on appraisals, and will confirm values by utilizing their own internal comparable sales analysis through an interviewing process with real estate brokers familiar with the area in question.

The vast majority of loans that are funded by Cal Western Investments are through individual investors.  Every investor is provided with a loan summary that supplies information in regards to:

loan terms

Property serving as collateral

Details about the borrower/guarantor

Cal Western Investments gives support to their investors, and assists them through every stage of the loan, which includes the documentation, servicing and loan management.

Currently, Cal Western Investments is proud to work with almost 50 active investors.  Some of these investors have a strong relationship with Cal Western Investments; a relationship that has been built and thrives on an enormous level of trust developed throughout the years.  In addition, Cal Western Investments is pleased to see this same development of trust blossoming with their other investors, and always look forward to developing future relationships with new investors.

For more information about Cal Western Investments, or if you would like to about becoming an active trust deed investor just subscribe to this Blog and all information will be e-mailed to your designated e-mail address