Entrust Learning Center > Keyword: Self-directed > Investing in Trust Deeds and Mortgage Notes

Investing in Trust Deeds and Mortgage Notes

You may invest in trust deeds, mortgage notes and other interest-bearing notes with your Entrust Account. These notes may be either in first or subordinate positions and may be purchased from brokers or private parties.

Documentation is recorded, as is customary, at county recorder's offices, and title to the property is insured as instructed.

You may also purchase or sell portions of mortgages. In such cases, your account holds an undivided interest in that portion of the note and receives the proportionate amount of income due under its terms. In addition, you may purchase discounted notes as well as real estate purchase options.

You will need to complete either a Buy or Sell Direction Letter For Real Estate Notes to properly complete the transaction. It is important that you follow the guidelines provided on these forms to avoid any unnecessary delays and costs.

Title and Escrow Companies

When title and or escrow companies are involved, proper instructions will be provided to them for all documents for your account. In the event that a local title or escrow company has additional requirements other than those provided in our comprehensive package, delays and additional costs may result. For ease of completion, in many cases facsimile (FAX) transmission of information is acceptable, followed by hard copy originals.

Funding and Servicing

We must receive all loan documentation prior to the funding of any loan. We cannot fund without a complete loan package, which includes a trust deed and note, title insurance, when applicable, and appropriate vesting.

If you designate a third party servicer, a complete copy of the loan documentation is required. The trust deed must show vesting in the custodial bank's name for your Plan's benefit. All other documentation, such as title insurance, must reflect the correct beneficial interest for the property described.

If you are a real estate broker or are otherwise in the business of providing loan servicing, you may provide that service for your notes. In all cases, whether you are the servicer or you have selected a third party for this service, a servicing agreement must be provided to Entrust describing the note in accordance with the documents we have received. The original note documents may be retained by your servicer.

While we are not licensed as a mortgage servicer, as record keeper we can receive payments directly from your payer, as well as process loan payments and other information for your loan. All original documents will be maintained at the custodial bank for safekeeping and eventual reconveyance.

As part of your arrangement with a payer, you may receive all payments for your note(s) for personal inspection. Such payments must be received intact by us. Entrust will not apply personal checks from you as an account holder to pay for obligations of notes in your account, as this violates IRS rules.

In all cases, all note information is required before funding can take place. This includes the name, address and social security number of the payer. If the payer is different than described by other documents provided, such information needs to be supplied so that proper credit can be applied. All payments must contain your account and loan number. If that information is not supplied, there may be a delay in posting to your income account.

Payments and Collections

All payments are promptly deposited in an FDIC-insured account in a custodial bank or in a bank of your choice (with the account properly vested.) If payments are made which also reduce the principal amount of the note, pay-downs will be shown on your account statements.

If note payments are not made when due, and your note is being serviced by a third party, all collection activity becomes the responsibility of you and your servicer. Entrust will not provide any collection services for past due notes other than those agreed to at the time of funding of the loan. In addition, any foreclosure options that may be required are your responsibility. Our role is solely to provide information to the outside foreclosure service of your choice.

Regulatory Reporting

All regulatory reporting for mortgage income is made by the servicer. If Entrust provides record-keeping services, the 1098 forms will be sent to the payer as required.

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