What is a Notice of Default for a Trust deed?
Full Question:
Answer:
A Trust Deed is a document recorded with a county recorder’s office creating a secured lien on real property which provides collateral for lenders and trust deed holders. Some states use a Mortgage instrument rather than a Trust Deed.
A borrower who owns or wants to own real estate needs a loan. The borrower executes a Promissory Note wherein the borrower promises to repay the lender. The recorded Trust Deed creates the secured interest attached to the borrower’s real property. If the borrower does not pay as promised, the Lender/Trust Deed Investor can look to the real property for repayment and/or recovery of their invested capital.
A First Trust Deed has first the priority of the lien (as compared to a Second Trust Deed) based on the date the Trust Deed is recorded. The earlier recording date of the deeds would have priority (i.e. first position). If you have a Second Trust Deed and the Borrower fails to pay the First, you would be responsible to make the First Trust Deed payments or suffer the risk of being foreclosed out and losing your invested capital.