Where is the Deed? - Posted by Matthew Chan

Posted by Bud Branstetter on April 19, 1999 at 10:06:52:

When you buy a new car and take out a loan you do indeed have title to the car. On that title, recorded with the state it will show that there is a lien against the car. In otherwords if you do not pay as agreed they will reposess the car. If you buy an older car from a used car lot they may keep the actual title until you pay as contracted. This can lead to problems an abuses. I would suggest you not buy a car where the title is not set in with your name on it.

It is similar with real property. You have title in the form of a deed. In a deed of trust state there is also a deed of trust recorded securing the interest of the person that loaned the money. With that DOT the lender can foreclose. The deed gives you the right to occupy and use the property. If you do not pay the lender will foreclose to get the right to occupy and use the property. In other words he will resell it.

Where is the Deed? - Posted by Matthew Chan

Posted by Matthew Chan on April 19, 1999 at 24:54:42:

In an RE discussion with a friend, I was explaining how the deed was similar to the title of a car and that the deed and the loan/mortgage were separate items. The context of this discussion centered around the importance of getting the deed signed over so that you had control.

He claimed that as a homeowner, he never got the deed to his house until his mortgage was completely paid off. Having never owned a home, I wasn’t sure what was the norm.

If someone buys a home, what exactly does the buyer get to prove ownership of his home if a bank holds a mortgage? Does the example of a bank holding title of a car until the car loan is fully paid off analogous to what happens with a homeowner with his house and a mortgage? Is the deed withheld from the homeowner until the mortgage has been satisfied?

I would appreciate the clarification. Thanks!

Re: Where is the Deed? - Posted by Irwin

Posted by Irwin on April 19, 1999 at 20:00:28:

Without getting into a technical discussion of title vs lien theory, for your purposes, most mortgages are liens against real estate, but do not vest any form of title in the lender. The deed vests legal and equitable title in the grantee/owner, SUBJECT TO the lien rights of any mortgagee. Most mortgage companies don’t hold onto the original deed once it has been recorded. Their mortgage, which is always recorded one instrument number after the deed, is all the protection they need.
In Trust Deed states, the legal theory is a little different, but as a practical matter there probably isn’t much variation. The mortgage company probably releases the recorded deed of conveyance to the home owner.
If you are the owner, you should demand at least a copy of the recorded deed from the title company for your records.
It is rare that someone has to produce an actual original deed in order to prove ownership - unless their deed has never been recorded. The recorder’s records are nearly always relied on to establish ownership. I have no idea if Y2K might affect those records.

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).