Mortgage lenders finance property loans according to your credit worthiness as well as income. The lender assumes the risk which you won’t repay the loan, so it ought to implement some type of protection for itself. With you — the borrower — signal a security instrument, the lender requires an interest in your property through either a trust or a lien before the loan is paid in full. Two kinds of security instruments are employed from the United States — the deed of the mortgage. Specific state laws determine which document is used.
Lien Theory vs Title Theory
Every state has adopted its own way of dealing with properties that are crocheted. Most nations practice title theory or Contracts theory; however, some states have altered their notions. In a title theory state, the mortgage lender will hold the title to the property before the loan is paid in full. At a lien theory state, the lender places a lien against the property until all payments have been received. If the debtors default on payment, the lender can foreclose and attempt to market the property to recover its loss. At a lien theory state the lender should go through the judicial procedure to proceed with foreclosure, while at a title theory state the lender does not.
Deed of Trust
At the loan’s closing, the debtors will signal numerous loan records. If your home is at a title theory state, you may sign a deed of trust. This document explains the terms and conditions of the loan, including its repayment length and interest rate. In addition, it acts to place the property’s title to your trust. A designated trustee commands the trust on behalf of the lender. Following the deed of trust is signed before a Notary Public, it is filed on public record with the county clerk or recorder. If the borrower defaults on payments, then the trustee can proceed with a foreclosure and following trustee’s sale of the property as explained in the deed of trust.
Mortgage
A mortgage document is like the deed of trust record. In addition, it includes the important information concerning the loan’s details. Once it is recorded a lien is put on the property in favor of the lender. If a foreclosure takes place on a property with a mortgage lien, a sheriff’s sale is usually held.
Satisfaction or Release
When the mortgage loan is paid in full your financial obligation to the lender is fulfilled. It no longer has an interest in your home, and must provide documentation to demonstrate this. California employs the deed of trust, so once a loan is paid back the lender drafts a deed of reconveyance to move the title from the trust. Other conditions might call these records satisfactions or releases. It is important to make sure this document is filed on file in a timely manner after your mortgage is paid to ensure no errors have been on the title report if you attempt to sell your property later on.