How mortgage documents lay the basis for foreclosures

| Jul 2, 2021 | Commercial Real Estate, Firm News, Real Estate Development |

Most people experience the money lending process by way of loans, and few loans are as widely effecting or comprehensive as a mortgage. Understanding some of the basics of mortgage law will help you understand what you’re signing up for and what the documents in your mortgage actually do.

What are notes and deeds of trust?

In a mortgage, one of the first pieces of paper the consumer receives is the “note.” The note, technically a promissory note, is an outline from the bank identifying:

  • The entity receiving the loan
  • The entity providing the loan
  • The security for the loan

Notes, as a document, are for more than just mortgages. Many types of financial documents are also notes, such as checks that you write. While checks are “unsecured” notes, a mortgage note is secured, meaning that security backing up its payment, such as a Deed of Trust

The deed of trust is the deed to the title of property held in trust until the note is paid off. Taken together, the note and the deed of trust are the two essential documents needed for a basic mortgage.

How does a deed of trust secure the note?

The deed of trust secures the note by in trust, an interest by the Lender in the property in the amount loaned. If payments are not made to the lender or the balance of the loan is not paid when due, the bank can foreclose on the property and have it sold to obtain funds to pay them what they are owed.