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Trust deed loans

 

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Trust Deed Loans

A licensed trust deed investment company (TDIC) offers investments in collateral-backed property loans. Unlike private individuals who are generally subject to usury laws limiting interest rates on loans, TDICs can legally lend to property owners at rates determined by market demand. Because TDICs usually lend to borrowers with needs banks cannot accommodate (e.g., fast turnaround, multiple-use real estate projects), market rates for trust deed investments are usually significantly higher than bank mortgage rates.

TDICs originate, underwrite, fund and service the loans for individual and/or group investors. Trust deed investors receive regular interest payments throughout the loan term and principal is repaid when the loan matures. In the event of default, TDICs generally manage workouts and, where necessary, foreclosure, on behalf of investors. Some TDICs have in-house real estate brokers who can re-sell REO in the event of foreclosure. Others may also have property management staff who can rent foreclosed properties on behalf of investors.
TDIC investment is secured by a deed of trust recorded against the title of the borrower's property.
In deed of trust, the borrower (trustor) transfers the property, in trust, to an independent third party (trustee) who holds conditional title on behalf of the lender or note holder (beneficiary) for the purpose of exercising tje following powers: (1) to reconvey the deed of trust once the borrower satisfies all obligations under the promissory note-, or (2) to sell property if the borrower defaults (known as Foreclosure).

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