Re: Where is the Deed? - Posted by Bill Gatten
Posted by Bill Gatten on April 19, 1999 at 12:57:15:
What your friend is referring to sounds like it could be a Contract for Deed (Land Contract, Contract for Sale or Contract for Mortgage). It is very similar to your car loan analogy… kind’a like a “pink slip lay-away plan.” However, he could also be describing a “Regular Mortgage”
But, with regard to your question about the Deed, always know that the bank that holds your mortgage does not “own” your home per se…unless you are in a “mortgage state.”
In a mortgage state, the mortgage itself conveys ownership to the lender until your debt is paid, thereby allowing them to foreclose on you if you fail to pay. In a trust deed state, however, it doesn’t work that way.
In a trust deed state, you are given the title (the deed) to your property on day one and it’s your house: no one else is on it, and YOU own it. The lender merely holds a promise to pay, “secured” by a “Trust” Deed (or “deed in trust”), which trust device is essentially a Beneficiary Directed Trust that can be used to acquire your deed should you default in your obligation to the Beneficiary. That is… your deed in trust, is placed in the hands of an entity empowered by your and the Beneficiary (the lender) to foreclose under certain circumstances). In such a “trust” arrangement, your bank becomes the Beneficiary; you are the Trustor; the Corpus of the trust is your deed: and a title company somewhere is the Trustee. The trust agreement itself contains direction by the Beneficiary (agreed to by the Grantor–you), telling the Trustee that it can foreclose on your deed, if told to do so by the Beneficiary, if you, as the Borrower/Grantor were ever to default.
In a mortgage state, the bank holds a "Mortgage (known as a “Regular Mortgage”) on your property, rather than a Trust Deed. In this scenario, it is the mortgage document itself that, by virtue of you having in effect conveyed the land to the creditor, provides the security for the lender relative to your obligation to pay. It gives the lender the right to remove you from the formula for breach of contract.
Now you know (that’s how to build a clock).