Check the broker’s licenses.In 2009, federal law changed and made it illegal for an individual who is not licensed as a mortgage broker to lend money on residential real estate. Residential real estate is defined as any 1 to 4 unit property: single family residences, duplexes, triplexes, and fourplexes are all residential properties. Make sure that you are dealing with the actual mortgage broker, not a loan officer who wants to place private money. The owner, who is usually the broker, is the one who makes the final decisions, and who is financially responsible for the loans that are made. You want to be dealing with the person behind the “buck stops here” if you want to get the real answers. When you find a broker, ask for their state and national license numbers. Verify that their license is valid by checking the National Mortgage Licensing System and the state licensing system (for Nevada mld.nv.gov). Check the state database for complaints, or legal actions taken against the company. Ask the examiners for information available to the public, which in Nevada, should include the companies score from their last audit.
Check the broker’s references.Investigate the broker by asking for references: from their investors, their vendors, their employees and their borrowers. If they are genuinely trustworthy, they will give you names and phone numbers that you can verify. If the broker tells you that they can’t give you references because they will be violating privacy laws, then walk away. They are probably hiding a terrible record behind privacy laws which don’t apply. Every good broker should have customers and investors willing to speak with you about their experiences. When you call the referees, ask for the property address that was loaned on and then follow the instructions in the next section to verify the data.
Verify the references and check the records.Next, verify if the referees told you the truth. Were they just people paid by the company to say good things? There is an easy way to do this. Ask for an address of a transaction that the referee was involved in and then go to your county’s assessor records and recorder’s office records and verify that a trust deed was placed on the property. Look at what liens were filed before the trust deed was recorded and what liens came after, and ask questions if you can’t figure it out. In Nevada, click on the assessor’s website at http://www.clarkcountynv.gov/Depts/assessor/Pages/RecordSearch.aspx, and put in the property address. Copy the parcel number at the top of the page, and then go to https://recorder.co.clark.nv.us/RecorderEcommerce/default.aspx, click on “parcel #” on the left side of the screen, and then put the parcel number in at the top of the page. Hit enter and scroll down to see all of the entries. Most of them will be in date order, but you can also click at the top of the date column so that you can see the most recent entries first. It should show that a trust deed was recorded on a certain date. By looking at the previous entries, you can verify whether or not there was a prior trust deed recorded, without a “reconveyance” being recorded afterwards. That would tell you whether or not the trust deed was in first position or not. The biggest scams in trust deed lending came from brokers selling the same trust deed over and over again, and not recording the trust deed with the recorder’s office. This simple method will stop you being caught out.
What services does a trust deed broker need to provide?Smart trust deed brokers always pull credit reports on borrowers, and are able to relay that information to the investor. We provide the credit score page to the investors, and an explanation of the derogatory items on the credit report. We do not allow the investors to download the entire credit report due to the FACTA Act, and the Red Flag Rules. As it might be possible for a member of the investor’s family, or a friend, to find the credit report and use it to commit identity theft, the investor could be subject to legal proceedings. Therefore, if an investor wants to see the credit report, he is invited to our office to read the credit report in person. The broker should also verify the borrower’s ability to repay on all residential loans. To do this, the broker should collect from the borrower tax return(s), pay stub(s), bank statements(s), pictures of the cash for the down payment if the funds are not in the bank, and any other proof that the borrower has enough money to purchase the property, fix up the property, and make the monthly payments, as well as pay off the principal balance in the allotted timeframe. Next, the broker should provide to the borrower ALL of the disclosures required by law. There are approximately 20 pages of forms that every borrower must receive, as well as a 5 page loan application, the good faith estimate, and the truth in lending. With the first trust deed that you do with a broker, you should verify that these forms have been filled out and signed, by looking at the actual file.
What happens next?Now you know how to investigate before you invest, the next stage is getting a detailed picture of the market and some personalized advice. If you would like more information, sign up for our newsletters, or contact Corinne Cordon, broker and owner of Capella Mortgage Corp, on 702-214-4700 or by email at firstname.lastname@example.org.
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