Title Search - Encumbrance - Types of Encumbrance - Types of Deed of Trust/Mortgage - US Mortgage

 

Module 7 - Encumbrance

Encumbrances:

A Claim, right or lien upon the title to real estate held by someone other than the real estate owners.

The Obligation claimed against an owner by a 3^rd party.

Liens can be Mortgage, Deed of Trust, Mechanics Liens, Local Taxes, Assessments, Judgments, attachments, etc.

Types of encumbrances:

1. Voluntary Encumbrance

Any Lien or Obligation on the owner of the property is willfully created by the owner

Ex/ Loan taken on the property

2. Involuntary Encumbrance

It is a Lien or Obligation which is imposed by someone else against the will and wish of the owners of the property.

Ex/ Tax Lien on the owner

Encumbrance Documents:

These are documents which create a Lien or Obligation against the ownership of real property.

In the event the owner of the property falls to perform the obligation his/ her interest will be sold to meet the obligation he or she has created.

Types of Voluntary Encumbrances:

1.      Contract of Sale

2.      Mortgage/ Foreclosure is Judicial

3.      Deed of Trust/ Foreclosure is Non-Judicial

1. Contract of Sale:

A contract between a buyer and a seller of real property to convey a “Title” after certain conditions have been met and payments have been made.

The buyer is called as “Vendee”

The seller is called as “Vendor”.

2. Mortgage/ Foreclosure is Judicial:

Mortgage is to pledge real property as security for the payment of a dept. It is the instrument by which real estate is pledged as security for the repayment of a loan.

Mortgagor: is the party who borrows the money from the mortgagee by pledging his property.

Mortgagee: is the lender to whom the property is conveyed as security for a loan.

 3. Deed of Trust/ Foreclosure is Non-Judicial:

It is a written document by which the title to land is conveyed as security for the repayment of a loan or other obligation.

There are three parties to a Deed of Trust:

Trustor: He is the Landowner or Debtor.

Trustee is an intermediate (third party) who acts on behalf of the beneficiary when the terms of the loan have not been met.

Trustee is a person or entity to which legal title is conveyed by the Trustor.

The Trustee acts on behalf of the Trustors when the terms of the Deed of Trust have been met and paid in full.

Beneficiary: The Lender.

Types of Deed of Trust:

1.      Purchase Money Deed of Trust

2.      Open Ended Deed of Trust

3.      Fictitious Deed of Trust

4.      All Inclusive Deed of Trust

1. Purchase Money Deed of Trust:

This deed of trust secures payment for all or substantially all of the value of the real property.

2. Open Ended Deed of Trust:

The deed of trust that may provide for additional advance of money in future is known as open ended deed of trust. (Credit Card Concept)

3. Fictitious Deed of Trust:

This is a standard form/blank long form (template) deed of trust that is recorded within the county.

A recorded deed of trust containing general provisions but naming no parties and describing no property.

It is used for reference only in a short form deed of trust.

Fictitious Deed of Trust is a document recorded by a trustee that does not cover an actual transaction.

The Trustee in the short form of deed of trust refer to the fictitious deed of trust and incorporate its terms and conditions without repeating them as a part of short form of deed of trust which is being recorded. These saves recording fee.

4. All Inclusive Deed of Trust:

A deed of trust securing payment of an obligation which is unpaid under a prior deed of trust.

It is a junior mortgage in which the payments are made by the buyer to the seller where seller acts as beneficiary for the repayment of prior open loans.

The all inclusive deed of trust is also often called as Wrap-Around Deed of Trust or a Hold Harmless Deed of Trust or Over-Riding Deed of Trust.