first trust deeds

[monkatom]

Do I understand this correctly. A first trust deed is the lender owns the property and you make payments to buy the property from them which is different from a tradional mortgage where you own the home and the lender must forclose to get the property.

If so whats to keep the lender from saying they did not get a payment, etc after you have almost paid off the entire balance?
Thanks

[justbroke]

The way I understand Trust Deeds works is that it's a three party transaction. The lender, the borrower and the third "uninterested" party. The third party actually holds the title. The lender would need to prove (don't ask me how) you are in default, for the third party to surrender the title to the lender. I don't know anything about that "foreclosure" process or any clause in the deed which allows this.

[HHM]

Fundamentally, there is no pratical difference between between a mortgage and Trust Deed (or Deed of Trust). Whether you use mortgages or deeds of trust is determined by the state. In both situations, the buyer owns the house, and the lender has a security interest.

Foreclosure is regulated by the State. The process and requirements do not change, you are either in a judicial state, non-judicial state, or a combo state.

As Just Broke pointed out, there is a "trustee" in a deed of trust state that actually holds on to the piece of paper that is the Deed. But the fundamental rights of all parties are the same, buyer owns, lender has security interest.

[monkatom]

Now I am really confused. Back story is I have a CHP 7 BK and foreclosure going on. Contacted a broker who said he could get me a private party loan using a 1st trust deed. When i googled 1st trust deed this is what I got:
"a first trust deed is different from other deeds in that it does not signify ownership, it is in fact a loan that once taken, grants usage of the land or property to the borrower while they pay off the loan. The company or entity granting the loan actually has possession of the property or land during the loan period. When the loan is fully paid then ownership transfers fully to the borrower"

?

[justbroke]

I don't understand what you wrote either. A 'First Trust Deed" is usually a first position lien secured by a Deed of Trust. Usually it's a three party transaction, not a two party transaction. The third party, as HHM wrote, is known as the Trustee. The Trustee holds the title to the property.

What you wrote, sounds more like a land contract.

[HHM]

Yep, that sounds more like a land contract. More specifically a wrap-around land contract.
The seller has their own mortgage obligation to a lender. The seller conveys a land contract to the buyer to sell the land after so many payments are made. Buyer pays seller, seller pays lender (the interest rate charged by the seller to buyer is usually a little higher than the mortgage rate charged by lender to seller, allowing seller to make a little money). The lender has the First Deed of Trust; seller is owner, buyer is slowly buying the property from the seller by making payments, but the buyer does not gain title until the LENDER is paid off.

In essence, when you do a Wrap Around Land Contract, the Buyer is buying the sellers right to take title when the mortgage is paid off.

[monkatom]

Thanks all. I e-mailed the lender to ask some more specific questions. This was his original e-mail that led me to ask my questions.

"I have a company that places private party money on 1st Trust Deeds."

When I googled 1st trust deeds I came up with this link that as you all mentioned made it seem like it was a land contract.

http://www.firsttrustdeeds.net/

Will let you know what he says.
Thanks

[HHM]

Ughh, you are probably getting into hard money lenders. You need to be careful with land contracts because YOU WONT OWN the property. If the seller defaults on the mortgage, the house can be foreclosed out from under you. Land contracts are not that much different than leasing.

[monkatom]

So I got the lender response this wa smy question.
Could you please explain 1st trust deed and how that is different from deed of trust.
His answer
A number is assigned to Deeds in the order they are recorded. So if you have one it's a 1st TD, etc.
So its sounds as if its a regular mortgage not a land contract?

[justbroke]

I think you re-read what HHM and I wrote. Position of any lien recorded at the county recorder's office, is nothing more than it's priority should the property be sold or otherwise be disposed of (foreclosure, etc). There are even debts that have higher priorities than "first" position liens (like property taxes are usually higher).

Yes, first, second, third just signifies the position as they (the liens) are recorded in the "books" maintained by the county/city/state recorder.

What HHM and I are pointing to is that you are probabaly getting involved with "hard" money which may be using a wrap-around land contract. These are different. While they may record a lien (deed of trust... maybe even in the first "position" to make it a "first trust deed" or "first deed of trust")... it's still a land contract underneath! You won't hold the deed at all, where in traditional mortgages, your name is on the Deed!

What HHM was instructing you well at is... beware of land contracts. They can be useful, but have their problems.