How to Broker Commercial Mortgage Loans

117712 Resource 78777 78860 78860 1141602924759 1142028700216 Controlled Mortgages Versus Deeds of Trust in Commercial Real Estate Financing

A Commercial Lender Can Foreclose Faster Using a Deed of Trust Than a Mortgage

It is customary in commercial mortgage finance to use the terms deed of trust and mortgage interchangeably.  They are both used to secure the payment of a commercial real estate loan, and if the borrower does not make the payments called for in the promissory note, the lender can use the deed of trust or the mortgage to foreclose on the commercial property.But there is a difference between a deed of trust and a mortgage.  To enforce a mortgage, the lender has to go to court.  To enforce a deed of trust, the lender merely has to notify the trustee that the borrower has defaulted.  As a result, a lender can foreclose a deed of trust much faster than a mortgage.A lender can foreclose a deed of trust in just four months in most states, although in practice most deed of trust foreclosures take about five to six months.  Mortgage foreclosures, in contrast, are seldom completed in less than a year, and sometimes they can drag on for two full years.Obviously, given a choice, most commercial lenders will choose to use a deed of trust, instead of a mortgage.  Many states, however, do not allow deeds of trust because too many sharp operators have swindled borrowers out of their property using this speedy process.  Around sixty percent of the states allow the use of a deed of trust. A mortgage only has two parties.  The borrower is known as the mortgagor.  A good memory device is to remember that the "-or" on the end of the word means that this party is the one who is giving something away, in this case a mortgage on his property.  The lender is known as the mortgagee.  The "-ee" on the end of a word means this party is the person reCEEving something.  (I mispelled "receive" on purpose!)  The mortgagee is receiving the mortgage.To foreclose a mortgage, the lender files a lawsuit to foreclose the mortgage.  After giving the borrower sixty days or so to conduct preliminary discovery, some states then allow the lender to file a motion for summary judgment.  If the borrower fails to answer or fails to provide the court with evidence of a genuine dispute as to the lender's right to foreclose, the lender's motion for summary judgment will be granted.  The sheriff will then be ordered to hold a foreclosure sale, which occurs about sixty days later.  Once again, this process, even if not contested, can take close to a year.  Borrowers frequently file countersuits in an attempt to confuse the issues and to delay the foreclosure.  All in all, it is a very frustrating process to foreclose a mortgage.While a mortgage has just two parties - the mortgagor and the mortgagee - deeds of trust have three parties - the trustor, the trustee, and the beneficiary.  A deed of trust is exactly the same thing as a trust deed, and the two terms are used interchangeably.  In a trust deed, the borrower gives title to the property to a stakeholder.  If the borrower defaults, under the terms of the trust, the stakeholder is instructed to give title to the lender.In a deed of trust, the borrower is known as the trustor.  The trustor (note the "-or" again) is giving away bare legal title to his property to a neutral, third party, stakeholder known as the trustee.  The trustee reCEEves the bare legal title.  Trustees are often title companies or attorneys.  Bare legal title is the right to have your name in the record books recorded as the registered owner of the property.  It is one of the bundle of rights an owner of property enjoys.  You can think of each of these rights as an arrow in a quiver.  Some of the other rights of ownership are the right to use the property, the right to collect the rents, the right to exclude others (get the heck off of my property), and the right to the quiet enjoyment of your property, free of disturbance by your neighbors.  So when a trustor transfers bare legal title to the trustee, he retains all of the other rights, until the lender completes his foreclosure.The beneficiary of the trust deed is the lender.  The lender is the party who receives the benefit of the trust when a deed of trust is created. When a trustor (borrower) defaults under a deed of trust, the beneficiary (lender) merely has to notify the trustee (title company) to start the foreclosure process.  The trustor normally has around four months to cure his default.  If, after four months, the trustor has not yet cured his default, the trustee will hold a private trustee's sale (foreclosure sale).  In theory investors will show up at the trustee's sale and bid at the sale.  In real life, properties very seldom sell at a trustee's sale.  The lender bids his loan amount, and when no one outbids him, the trustee gives the beneficiary (lender) a Trustee's Deed to the property.  The Trustee's Deed conveys the trustor's title to the property to the lender.It is important to note that at no time in the process is the government or the courts involved in the foreclosure of a deed of trust.  The trustee's sale is a private one, as opposed to a governmental one, like a Sheriff's Sale.  As a result, a private foreclosure under a deed of trust can take place in theory in just four months (or around five to six months in practice because the trustee never moves as fast as he should).You can learn the entire practice of commercial mortgage finance by purchasing our nine-hour video training program, "<a href="http://www.c-loans.com/video.html">How to Broker Commercial Mortgage Loans</a>".  9 application/xml false commercial finance training commercial financing software commercial financing training commercial mortgage commercial mortgage software commercial mortgage training deed of trust How to Broker Commercial Mortgage Loans Become a Commercial Mortgage Broker in Just Nine Hours http://www.c-loans.com/video.html Mozilla/4.0 (compatible; MSIE 6.0; Windows NT 5.1; SV1; .NET CLR 1.1.4322) 71.50.245.172 71.50.245.172 GBlackburne false true false false true 198508 false false true false false false true 78777 blog blogsite/CLoans/web