Trust Deed Legal Issues
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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.
Related posts:
- Introduction To Deed Of Trust Investments
- Deed Of Trust Vs. Stock Market
- Coppercrest Funding & Trust Deed Investing
- What Secures A Trust Deed Investment ?
- Trust Deeds Basics
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