Types and characteristics of mortgage companies

Mortgage bankers, mortgage brokers, or mortgage companies are primarily representatives of the ultimate sources of money, such as life insurance companies, savings banks, trust or pension funds, or private parties. They are essentially money brokers who may or may not service the loans they originate. These entities are not thrift institutions, nor are they depository institutions, but they do assist by bringing the borrower together with a lender and charge a fee for this service.

Types of mortgage companies

Investment bankers – Investment bankers make a market for both new and seasoned mortgage–backed securities. These firms, called securities dealers, buy and sell securities from lenders and investors. Mortgage bankers, savings banks, pension funds, insurance companies, and mutual funds generally conduct their secondary market transactions with investment bankers.

Mortgage loan brokers are in the business of locating borrowers and lenders, and arranging loans between them. As such the loan broker takes no risk of loss. Another distinction between a mortgage banker and a mortgage (or loan) broker is that mortgage bankers service the loans of the lenders that they represent, whereas loan brokers usually do not. Mortgage bankers differ from mortgage brokers in that the former generally are not third parties to a loan. They generally fund the loan with their own funds.

Mortgage bankers are generally incorporated businesses that can make loans with their own funds or through a line of credit. The mortgage banker originates, finances "funds", and closes loans secured by real estate and sells them to Institutional investors for whom the loans are thereafter serviced. While at times a mortgage banker might act in a broker capacity, particularly if the loan is for an amount beyond the capacity of the mortgage banker to fund, this would be the exception rather than the rule.

Noninstitutional lenders

Many of the loans made by mortgage bankers are made for particular investors such as other lenders and pension plans. They will make the loans to meet the lending criteria desired by these particular investors. Much of their activities deal with out–of-state lenders and investors who desire to make long–term loans secured by California real estate. Because of the size of our real estate market, California mortgage bankers can assemble packages of trust deeds of significant value. Mortgage Correspondent – When a mortgage banking company represents a life insurance company, bank, thrift association, pension fund, or other lender, it is called a mortgage correspondent. It "corresponds" on behalf of its principals in dealing with prospective borrowers. The mortgage correspondent is paid a fee in exchange for originating, processing, closing, and servicing loans. The firm may be given exclusive territories, in which case the correspondent will be entitled to a fee, even if it had not actively solicited the loan; or it may be nonexclusive, in which case the correspondent is in effect in competition with the lenders that it represents. Whatever the type of arrangement, loan correspondents serve a very valuable function in real estate financing for lenders whose headquarters or principal offices are located great distances from the properties on which they make loans. Correspondents have been especially successful in the Far West, particularly in California. Although most mortgage companies act as correspondents in investing others' funds, there are many firms that invest their own funds exclusively. Another category of mortgage lender is a hybrid, both investing money into real estate trust deeds and mortgages for others in an agency or fiduciary capacity, and its own funds in the role of a principal.

Characteristics of mortgage companies

Type of institution – Brokerage.

Mortgage companies do not take deposits, but finance their operations through short–term bank loans, their own capital, and fees from sales and servicing. They routinely sell nearly all the loans they originate, and are minor holders of mortgage debt.

In California, mortgage companies are licensed by the Department of Corporations, and they are subject to lending and other general business regulations.

Mortgage companies may also engage in a number of related real estate activities. These include brokerage, development, construction, and property management. This is especially true when activity in the mortgage market slows down.

Syndication

A syndicate is an organization of investors pooling capital for real estate investment. Syndicates can take the form of a corporation, a full partnership or, the most popular, a limited partnership. A typical syndicate combines the money of the individual investors with the management expertise of a sponsor, known as the general partner, and follows a three step cycle: acquisition, operation and disposition.

In California, the Department of Corporations regulates control of syndicates. Under the Corporation's Code, real estate brokers may engage in the sale of real estate syndicate security interests without obtaining a special broker–dealer license. However, all such sales must be made under strict adherence to the full disclosure provisions of the California Uniform Partnership Act. In addition, the California Corporations Code, Section 15507, states that a limited partner may become liable for the total debts of the partnership if the limited partner takes an active role in management.

Syndicates are considered to be investment conduits that pass profits and losses to investors in proportion to their ownership shares. Any tax liabilities are imposed at the investor's level. Intrinsic in the design is the investors' liability for debts of the partnership, which are usually limited to their investment. The income from these syndicates, or limited partnerships, is considered passive by the IRS.

In the 90's, a new form of business organization, a limited liability company, or "LLC," was introduced which combines the single–level tax benefit of a partnership with the organizational structure and limited liability of limited partnerships and corporations. Members of an LLC can participate in running the organization without becoming personally liable for business obligations.

In California, an "articles of organization" form must be filed with the Secretary of State to establish an LLC. The LLC format may incur higher fees and taxes than general or limited partnerships.

Corporate bonds are credit instruments used to raise long–term funds. When these bonds are backed by a mortgage on specifically described real estate.

Real estate investment trusts

Real Estate Investment Trusts (REITs) are trusts, owned by shareholders who can exchange their shares on the open market. REITs provide a means by which relatively small investors can participate in large–scale real estate investments. REITs are very heavily invested directly in real estate.

REIT is a creature of the federal tax law. It was created in 1960 with the goal of encouraging small investors to pool their resources with others in order to raise venture capital for real estate transactions. It has been called the "mutual fund" of the real estate business. Just as mutual funds invest in a diversified portfolio of corporate stocks and bonds, REITs invest in a diversified portfolio of real estate and mortgage investments, with a large number of investors who combine or pool their funds. REITs are conduits for investment income only. They are organized under state law as unincorporated associations managed by trustees. They are creatures of federal tax law which permits their distributions to shareholders to be nontaxable to the trust, so long as certain requirements are met. They provide a means by which relatively small investors can participate in large–scale real estate investments.

Requirements – Briefly, at least 90% of ordinary income must be distributed to shareholders; more than 75% of assets must be real estate and more than 75% of income must come from such investments; there must be 100 or more shareholders with no fewer than six owning more than half the trust; the trust may not hold property for sale to customers in the ordinary course of business or provide services to tenants except through independent contractors.

Tax treatment – REITs are tax–exempt only on the income passed through, and shareholders must pay personal income tax on that. Passthroughs of depreciation may offset ordinary income and passthroughs of capital gains do receive capital gains treatment. Under the Tax Reform Act of 1986, profits and losses are classified as "passive" income, putting limitations on the deductibility of ordinary losses.

During the economic crisis of the 1970s, many REITs folded under the pressures of poor management, excessive speculation, withdrawal and cancellation of take–out commitments, terminations of bank lines of credit, poor credit analysis, excess building in many parts of the country (particularly in the condominium market and in recreational projects), and sagging demand.

In the 1980s, to restore confidence in the REIT, concessions worked out between REITs and the banking and securities industry slowly revived REITs. This slow revival continued until the late 1990s, when a hot stock market put a damper on REITs. By 2001, the stock market declined and some money began to flow back into REITs.

Types of mortgage companies

Mortgage bankers, mortgage brokers, or mortgage companies are primarily representatives of the ultimate sources of money, such as life insurance companies, savings banks, trust or pension funds, or private parties. They are essentially money brokers who may or may not service the loans they originate. These entities are not thrift institutions, nor are they depository institutions, but they do assist by bringing the borrower together with a lender and charge a fee for this service. Investment bankers – Investment bankers make a market for both new and seasoned mortgage–backed securities. These firms, called securities dealers, buy and sell securities from lenders and investors. Mortgage bankers, savings banks, pension funds, insurance companies, and mutual funds generally conduct their secondary market transactions with investment bankers.

Mortgage loan brokers are in the business of locating borrowers and lenders, and arranging loans between them. As such the loan broker takes no risk of loss. Another distinction between a mortgage banker and a mortgage (or loan) broker is that mortgage bankers service the loans of the lenders that they represent, whereas loan brokers usually do not. Mortgage bankers differ from mortgage brokers in that the former generally are not third parties to a loan. They generally fund the loan with their own funds.

Mortgage bankers are generally incorporated businesses that can make loans with their own funds or through a line of credit. The mortgage banker originates, finances "funds", and closes loans secured by real estate and sells them to Institutional investors for whom the loans are thereafter serviced. While at times a mortgage banker might act in a broker capacity, particularly if the loan is for an amount beyond the capacity of the mortgage banker to fund, this would be the exception rather than the rule.

Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities

Many of the loans made by mortgage bankers are made for particular investors such as other lenders and pension plans. They will make the loans to meet the lending criteria desired by these particular investors. Much of their activities deal with out–of-state lenders and investors who desire to make long–term loans secured by California real estate. Because of the size of our real estate market, California mortgage bankers can assemble packages of trust deeds of significant value.

Mortgage Correspondent – When a mortgage banking company represents a life insurance company, bank, thrift association, pension fund, or other lender, it is called a mortgage correspondent. It "corresponds" on behalf of its principals in dealing with prospective borrowers. The mortgage correspondent is paid a fee in exchange for originating, processing, closing, and servicing loans. The firm may be given exclusive territories, in which case the correspondent will be entitled to a fee, even if it had not actively solicited the loan; or it may be nonexclusive, in which case the correspondent is in effect in competition with the lenders that it represents. Whatever the type of arrangement, loan correspondents serve a very valuable function in real estate financing for lenders whose headquarters or principal offices are located great distances from the properties on which they make loans. Correspondents have been especially successful in the Far West, particularly in California. Although most mortgage companies act as correspondents in investing others' funds, there are many firms that invest their own funds exclusively. Another category of mortgage lender is a hybrid, both investing money into real estate trust deeds and mortgages for others in an agency or fiduciary capacity, and its own funds in the role of a principal.

Mortgage companies do not take deposits, but finance their operations through short–term bank loans, their own capital, and fees from sales and servicing. They routinely sell nearly all the loans they originate, and are minor holders of mortgage debt.

In California, mortgage companies are licensed by the Department of Corporations, and they are subject to lending and other general business regulations.

Mortgage companies may also engage in a number of related real estate activities. These include brokerage, development, construction, and property management. This is especially true when activity in the mortgage market slows down.

Conventional mortgage loans are rare

Conventional mortgage loans is the most common type of mortgage.

Conventional mortgage loans make up any mortgages that are not guaranteed by the government. In general, conventional loans are more difficult to qualify for and require large down payments; however, the guidelines used to determine whether a property is suitable for purchase under the mortgage terms are more lenient. This is the most common type of mortgage.

Conventional mortgage loans are available with fixed or adjustable interest rates. Some loans may require mortgage insurance. Some manufactured-house customers can get mortgages from local banks, similar to those for site-built houses. These mortgage loans generally carry lower interest rates and have more legal protections than the loans through the dealers. However, the mortgage loans are rare because many manufactured-house customers have bad credit, or lack a credit history, or don't know that they have the option to seek a mortgage.

Practically all conventional conforming loan programs share the same core document requirements:

Pay stubs for the past two pay period.

Bank statements for the previous two months.

Tax returns and W-2s for the past two years.

Some programs are called no income verification, no asset verification and no documentation loans.

Unfortunately, many homebuyers and investors misinterpret the true program requirements. Contrary to what many people mistakenly believe, these programs will still require a good deal of borrower documents. They just don't require as much.

The no income verification program will not require income documentation, but lenders will still require documentation of the borrower's employment. The no asset verification program will not require documentation of the "source" of the asset funds that the borrower must have to qualify for the loan. However, the no asset verfication program will still require documentation of the current funds.

The no documentation loan is a combination of the no income verification and no asset verification programs.

The "no doc" will require income and asset-source documentation, but it will still require employment, current asset and other documentation.

Describing The Foreclosure Process

Basic Foreclosure Process Explained

Foreclosure is a process of legal action taken by a lien holder or mortgage holder, as set forth by state and local laws and a contractual obligation. This obligation is spelled out in a mortgage contract or trust deed.

The foreclosure action, pre-arranged in the contract, is taken when the terms of the contract are not met. It almost always means that the payments on the loan have not been made. The loan which was used to buy real estate is not being paid back and is

considered in default. "Default" being the non-performance of a contractual or other obligation such as not making payments on a note.

The contract (mortgage or trust deed) states that if the loan is not paid according to the agreement the one granting the loan is entitled to gain possession of the property in order to retrieve the money they lent for that property.

The ultimate goal of the foreclosing lender is to end the rights of possession of the property owner. Foreclosure then, is a process whereby the lender takes a property back from the borrower who's loan is in default and then sells the property to pay off the loan.

Sounds complicated? Not really.

A simple analogy is that of repossession. Example: When you buy a new car, most likely you will need an auto loan. The loan may come from your bank, credit union or even the bank or lending institution the auto dealership works with. In most states you get to

drive the car off the lot, registered in your name and the name of the lender of the loan. Likewise, the title to the vehicle is in both names and held by the lender. When you payoff the loan, the title is sent to you, with only your name on it. You drive the car clean it repair and maintain it but it isn't your until the loan is paid off.

Try not making your auto payments for three or four months and watch what happens. Most likely you will receive a series of letters from the lender, progressively getting a little more unfriendly. The lender may call to try to resolve the matter of late payments.

Whether or not satisfactory arrangements are made make no mistake about it you are in default of your contractual obligation to make the timely loan payments stipulated in the loan agreement.

If the contract is not adhered to, the lender has the right to protect his interest in the agreement. The lender's exposure is secured by your signature on a promissory note and by the vehicle itself.

According to most contracts or agreements of this nature, the lender will have the right to and may choose to accelerate the loan thereby making the full amount of the principal portion due and payable immediately not just the portions or payments in arrears.

Acceleration, commonly known as "calling in the note or loan", is done so that the lender can avoid having to chase a borrower through cycles of being behind in payments and playing catch-up.

Most lenders will work with you when you get behind in your regularly scheduled payments. If you fall behind enough show no ability to get caught-up in a reasonable length of time or are just generally uncooperative with the lender the lender will most likely accelerate the loan.

Banks and other lending institutions are not in the automobile business. Banks only male money on the interest they charge. If the loan is not performing, the lender is not profiting on its investment. Its profits come from the interest you pay on the loan.

All banks are regulated. That means that they have to perform within very specific guidelines and the laws of the land. The banks us our money to loan other's money and to invest. If the return (the interest) on the investment or loan the bank makes is not enough to cover its expenses and make a reasonable profit, then the bank is not running profitably. Who then, in their right mind, would want to deposit their hard earned dollars in a business or bank in this case that was not running profitably?

Banking regulations are supposed to protect the consumer from fraud misuse and misappropriation of the monies the consumer entrusts the bank with.

Following is an example of the acceleration process.

Let's say that you bought $12,000 car. You put $2,000 down and you borrowed $10,000 at 9.50% interest for 36 months. Your monthly payments would be $320.33. If you make no payments what-so-ever, the scenario would look like this:

30 Days You Owe 320.33

60 Days You Owe 640.66 plus late fees for 1 month

90 Days You Owe 960.99 plus late fees for 2 months

91 Days You Owe 10,000 plus late fees, interest and collection expenses

If suitable arrangements can not be made the lender will "call in the loan," thereby making the full amount of the original $10,000 loan due and payable immediately. (plus interest, late fees and other expenses associated with trying to collect on the loan)

While all contracts and loan agreements vary, typically, 90 days is all you get.

If you still can not make satisfactory arrangements remove your personal possessions from the vehicle because the truck with the 'hook' on the back will surely come.

Copyright © The Real Estate Library 1994-2004
Copyright © 2004 Federal Homes

About Mortgages

Much is the same with real estate loan agreements and mortgages.

When Jack secure a home loan from a bank he will sign two of the most important documents he will ever sign. The first is the promissory note. Promissory note outlines the terms and conditions of the loan and obligation to make the specified monthly payments to the bank. Technically speaking the note is the signed document that acknowledges the existence of a debt, and the promise to repay the debt.

The second document is the mortgage contract. Mortgage contract is a pledge of security collateral for the debt. This legal instrument is created to give mortgagee (lender) certain rights to the property in the event the mortgagor (borrower) fails to perform as agreed in the loan agreement by pledging the property being financed as collateral. The mortgage given to a bank is not evidence of a debt.

A mortgage simply pledges the property as security for the payment of the loan.

There are several types of mortgages prepared for all kinds of situations. In some states, the contract actually transfers the property to the lender until the terms of the mortgage contract are met. In other states, the mortgage acts as a lien against the

property. The borrower retains possession and use of the property, as long as the terms of the mortgage contract are met.

Theodore J. Dallow, a recognized foreclosure expert and editor-in-chief of "FORECLOSURES", a professional newsletter, points out the five basic covenants in a mortgage agreement:

1. The borrower agrees to pay the principal mortgage debt.

2. The borrower will keep the property insured against fire, for the benefit of the lender.

3. No building on the property will be removed or destroyed without the consent of the lender.

4. The full amount of the principal portion of the loan will become due and payable, in the event that the borrower defaults on the payment of the principal, interest, taxes or assessments.

5. The borrower will agree to the appointment of a receiver, if foreclosure proceedings occur.

The contract states that the borrower will protect the property and pay the loan back. It also states that if the borrower doesn't abide by the agreements, the lender will accelerate the loan if payments aren't made and that the borrower agrees to the foreclosure process should it become necessary. Therefore, by signed contract, the lender must accelerate the loan and must foreclose on the property, should it become necessary.

The lender is regulated and is loaning out the consumers' moneys. The lender must protect its depositors. By law and by contractual obligation, the lender must accelerate and/or foreclose.

Type of Deeds: General Special Grant Warranty Deeds

General Warranty Deed

For the property buyer, the general warranty deed is the most attractive because it provides the most protection. The general warranty deed extracts several covenants and guarantees from the grantor (seller) that the grantor's title to the property is valid, marketable and can be legally conveyed to the grantee (buyer).

General warranty deeds normally contain at least five covenants, by which the grantor offers guarantees about the title:

1. Covenant against encumbrances. The grantor provides assurances that property's title and real estate have no encumbrances other than those expressly stated in the deed. For more information, see the "Marketable Title" and "All About Easements" article.

2. Covenant of further assurance. If title defects are subsequently found, this covenant activates the grantor's promise or agreement to perform any acts required to correct those defects, within reason.

3. Covenant of quiet enjoyment. This covenant is the grantor's assurance that no other person or party has claims to the property that are superior to the grantee, except as spelled out in the deed. The grantor guarantees that the grantee's title ownership will be good against any other claims of title ownership of the subject property. So, the grantee can rest easy and not have to worry about being evicted or disturbed by a third party having better title or lien.

4. Covenant of seisin. The legal term "seisin" or "seizin" assures that the grantor actually possesses the ownership interest being conveyed and has the right, authority and legal capacity to convey that ownership interest. For example, if the seller is conveying fee simple absolute ownership of a parcel of property, that seller would be violating this guarantee if in fact the seller only had a fee simple defeasible estate.

5. Covenant of warranty forever (warranty of title). If the title conveyed is subsequently challenged by another person or party claiming actual ownership, this covenant requires the grantor to pay for any expenses required to defend the title against that challenge.

The grantee can sue the grantor for damages and/or to force the grantor to correct defects, if it is later discovered that the title is not as marketable and encumbrance -free as promised. Note that receiving a general warranty deed does not necessarily mean that the grantee receives good, clear title. The grantor may be a liar or con artist. The grantee can try to sue the grantor—if the grantor can be located and forced to comply—but the damage is already done. Although the above covenants should be clearly included in the general warranty deed, some states set forth that those covenants are assumed if the deed is identified as a general warranty deed. For example, Illinois, Wisconsin, Michigan and Minnesota recognize all of the usual general warranty covenants if the deed contains the granting clause "convey and warrant." Virginia, West Virginia and Pennsylvania recognize the same with the granting clause "warrant generally."

Special Warranty Deed

Also called a limited warranty deed, the special warranty deed may be used if the grantor (seller) does not want to assume all the risk and liabilities of a general warranty deed. Some states call this a grant deed.

The special warranty deed usually does offer limited covenants of seizin and against encumbrances . So the grantor assures valid possession and ability to convey title, but limits guarantees about encumbrances to the period that the grantor actually owned the property. An "as is" or bankruptcy sale of a property will often use a special warranty deed. For example, Jack buys a house from Jill. Jack later sells the property to Spot with a special warranty deed. If Jack had taken out a mortgage loan shortly before selling it to Spot and did not disclose it—and that mortgage places a lien against Spot's property-—Jack is still liable.

However, if it comes to light that Jill had secretly sold interest to the property before selling it to Jack and that other party now challenges Spot's title, then the special warranty deed relieves Jack of any liability.

Quitclaim Deed The quitclaim deed accomplishes a simple conveyance of the grantor's ownership interests or claims to ownership interest. The quitclaim deed offers no guarantee that the grantor actually possesses any ownership interest, let alone has the ability to convey title. In fact, the quitclaim normally only conveys the grantor's current interest, if any, and not the property itself.

If the grantor's purported interest are false or invalid, no ownership interests or property are conveyed. Also, if the grantor gains ownership interest after the quitclaim deed is conveyed, that ownership interest remains with the grantor and is not covered by the outdated quitclaim deed.

Quitclaims are often used in corrective or simple situations. For example, if the title erroneously lists the ownership as Susan Jones (instead of Suzanna Jones) Suzanna can record a quitclaim deed with the correct spelling. Another example is if Quincy helped his daughter Paula buy a house, and then Quincy wanted to remove his name from the title, he can issue a quitclaim deed that would remove him from the title.

Quitclaims are also recommended if the grantor (seller) is unsure about the quality of the title he or she possesses. For example, if you obtained a property through a foreclosure sale or adverse possession, you may want to consider using a quitclaim deed when you sell it.

Bargain and Sale Deed

Sometimes called a "deed without covenants," the basic bargain and sale deeds offer no warranties, making them similar to quitclaim deeds. However, there is always a clear assumption that the grantor actually possesses and is able to convey title to the property. So unlike the quitclaim deed, the bargain and sale deed actually does convey the land—and not just the grantor's interests.

Grant Deed

Similar to the special warranty deed, the grant deed only covers the actions of the grantor (current owner) and makes no promises about previous owners. This may be acceptable to some buyers, if they conduct a thorough title examination and due diligence, as well as obtain title insurance coverage. However, many buyers try to stay away from grant deeds, instead favoring the general warranty or other stronger forms.

Requirements for a Valid Deed

There are several requirements that must be met to make a deed completely valid. The most basic and overarching of these requirements is that the deed must meet all of the legal requirements of the state in which the subject property is located.

If the deed is being used to convey title to property in Alaska, the deed must meet all of Alaska's legal requirements—even if the transaction is being closed in an office in Miami.

Although each state varies, all states have most of the following requirements:

1. Written. The statute of frauds of most states typically requires written deeds, making oral deeds unacceptable.

2. Identified parties. The full names of both the grantor and grantee must be included, often with their current official address. The name indicated as grantor should be the same name currently recorded as titleholder to the property. However, if the indicated name is different from the grantor's true name, the deed is still valid. Thus, misspellings and different names will not invalidate a deed-in fact, the grantor's name often does not have to appear in the deed-as long as the grantor adequately signs it. A common way to confirm this fact is with the use of the term "the undersigned" at the start of the deed.

3. Grantor capacity. The grantor must be of legal age and legal competence to convey the title. Most states will void a deed if the court has declared the grantor to be insane or mentally incompetent to understand in a reasonable matter the nature and consequences of the transaction, especially at the time the deed is signed.

4. Consideration. The deed should clearly describe the consideration, such as the purchase price, being given to the grantor for conveying the property. But this has become a formality with most deed forms, so the actual presence of consideration is unnecessary. Consideration may not be even necessary, especially if the grantor is "giving" the property to the grantee. Note, however, that creditors may invalidate such gift transfers as fraudulent attempts to circumvent the creditors' rights.

5. Granting clause. Also called words of conveyance, the deed must clearly state the grantor's intention to convey the title to the grantee. Warranty deeds typically use the phrase "convey and warrant" or "grant, bargain, and sell." Quitclaim deeds typically use the phrase "convey and quitclaim" or "remise, release, and forever quitclaim."

6. Habendum clause. The deed's habendum clause describes the estate being conveyed. This clause will indicate whether the title being conveyed is fee simple, life estate or leasehold. This clause should be read carefully. For example, whenever a time limit or condition is indicated, the fee simple could be turned into a leasehold or life estate. Also, if the habendum clause indicates some sort of usage, the conveyances may just be of an easement, rather than fee simple or leasehold. For more information about types of estates, please see the "Title and Estates in Land" article.

7. Legal description. A complete and precise legal description of the subject property must be included in the deed. For more information, see the "Survey and Legal Description" article.

8. Grantor signature. The grantor must sign the completed deed. Note, however, that the grantee's signature is not required. If the signed name does not match the name indicated in the body of the deed or the grantor's true legal name, the deed may still be considered valid. [For example, Jonathan Xavier Jones signs his name John X. Jns, the deed may still be considered valid.] Persons unable to write may affix their mark with an X or sometimes a thumbprint, but a witness is usually required for such signatures.

9. Delivery. The deed must be legally delivered by the grantor during the lifetime of the grantor; and some states require that it be accepted by the grantee to complete the transaction. If the grantor fails to deliver the deed while he or she is still alive, the deed (even if signed) will not be valid if the grantor has died before delivering the deed. However, the grantee does not have to receive the deed in order for delivery to occur. Delivery occurs whenever the grantor has executed the deed and signifies his or her intention to finalize the deed. Although words and action are normal, deeds can be delivered without one or the other. Note that silence by the grantee or the official recording of the deed is typically considered acceptance by the grantee.

10. Recording. To make the conveyance official, the deed must be publicly recorded, usually with the local county records office. This recording also prevents title challenges from third parties. Optionally, the deed may also contain the following items:

Warranties of title. Indicate any covenants or guarantees that the grantor provides with the deed.

Recitals. Indicate mortgage liens and other encumbrances against the property.

Exceptions and reservations. The grantor may set aside certain portions of the property or the estate being conveyed. These exceptions and reservations must be clearly spelled out in the deed.

Official date. This is customary, but lack of it will not necessarily invalidate the deed. Seal. Most states no longer require seals, but a few still do. However, most states require official corporate seals on deeds executed by a corporation.

Witnesses. Many states require witness signatures, often two separate persons, to make the deed official. They are definitely required when the deed is signed and executed with a mark.

Documentary stamps. Often called transfer stamps, these are forms of taxes charged by states, counties and municipalities to convey property or to record certain legal documents. For example, a 1999 home purchase in Chicago will incur a $1 per $1,000 (of the sales price) transfer stamp charge from the state of Illinois, as well 50? per $1,000 charge from Cook County and a shocking $7.50 per $1,000 from the city of Chicago.

It should go without saying that a deed obtained by fraud, forgery, misrepresentation, or coercion can and will be voided and set aside by the courts. The courts may also set aside mutual mistakes, when both the grantor and grantee have serious, mistaken assumptions about the transactions.

We hope that you've found our Mortgage and Real Estate http://magicmortgage.blogspot.com helpful and informative. We welcome all comments, critiques and suggestions.

Types of Deeds

Property buyers and investors, as well as their agents and attorneys, must carefully examine the deed presented at closing and being used to convey the property. Even before the closing, the buyer's attorney should negotiate to have the best type of deed, at least from the buyer's point of view.

Different types of deeds offer varying levels of protection and assurances to the grantee. There are five common types of deeds used in most real estate transactions:

1. General warranty deed. This deed offers the grantee or buyer the greatest amount of protection, because the grantor must make several guarantees about the property.

2. Special warranty deed. Also called a limited warranty deed, this deed does not provide all of the guarantees of a general warranty deed.

3. Quitclaim deed. This deed offers the grantee no guarantees about the title and property. All it does is convey any interests that the grantor may have.

4. Bargain and sale deed. This type of deed has slightly more protection than the quitclaim. The bargain and sale deed normally indicates that the grantor actually has the power to convey the title. Other guarantees may be added, but not required.

5. Grant deed. Similar to the special warranty deed, the grant deed only covers the actions of the grantor (current owner) and makes no promises about previous owners.

All of the preceding five common deeds will be discussed in greater detail later in this article. Meanwhile, in addition to the above, many states use special purpose deeds to handle certain transactions:

Administrator's deed. This type of deed is used by the court appointed administrator who is charged with disposing the remaining assets of a person who has died without a will to convey the title of the deceased person's real property to a purchaser, heir or other party.

Deed in lieu of foreclosure. When mortgage loan borrowers have defaulted on their loan and have no practical hope of recovering, they can avoid the further cost and demands of foreclosure proceedings by surrendering their property to the lender. The title to the real property is then conveyed through this deed. For more information, see the "What You Should Know About Foreclosure" article.

Deed in trust. When establishing a land trust, this deed is used to establish the land trust and convey the property ownership to the trustee.

Executor's deed. This type of deed is used by the executor — who is appointed by the will of the deceased person, to administer the terms of the will to convey the title of the deceased person's real property to a purchaser, heir or devisee.

Gift deed. When giving or donating property without expectation of any repayment or consideration, the gift deed may be used in some states. Guardian's deed. This type of deed is used by the court appointed guardian who is charged with administering the assets of someone legally incompetent (because of age, senility or the like) to convey the title of the incompetent person's property to a purchaser or other party.

Referee's deed. In many states and localities, the referee's deed is used to convey title sold during a foreclosure sale.

Release deed. Also called a deed of release, the release deed is used to remove liens and claims currently recorded against the property. This is primarily used to remove a trust deed. The lender will issue the release deed when the outstanding loan has been satisfied.

Sheriff's deed. In many states and localities, the sheriff's deed is used to convey title sold during a sheriff's sale or an auction of a property, ordered by the court, to satisfy a judgment.

Tax deed. When title to the property is sold by the court to satisfy unpaid delinquent taxes (usually real estate), the tax deed is used to convey the property's title to the purchaser.

Trust deed. Also called a deed of trust, this instrument is sometimes used instead of a typical mortgage note to secure a mortgage loan.

Trustee's deed. When removing title from a trust, the trustee will often use the trustee's deed to convey title out of the trust.

In next articles we will look deep to all these deeds listed above. Note from editor. As you see there are provided some basic aknowlegments about mortgage and real estate. May be you know all this things, but it will be interesting even for prefessionals in real estate. All this information provided from real estate finansist point of view, but for individual home buyers or home sellers it is good too.

All About Deeds

Many people unfortunately confuse titles and deeds. They are related, but they are not the same thing. Title refers to the ownership rights to a property, either real property or personal property. So you can have title to a car (personal property) or a condominium (real property).

Introduction to Real Estate: Land; Real Estate; Real Property

Any understanding of the legal issues involved with real estate and mortgages must begin with the land and the other key elements of real estate, as well as how real estate is owned.
Real estate in the United States follows the allodial system of property ownership. This system recognizes the right of individuals to completely and fully own a parcel of property. This is no small thing, especially when this system is compared to other systems: Feudal system. All the lands are owned by the sovereign ruler, who then gives certain ownership or usage rights to his or her subjects, who then may allow peasants and other workers to lease land for farming or other use. This was the predominant system in Europe for much of the Common Era.
Communist system. Similar to the feudal system, all the lands are owned by the state-or the "people".
Use of land is dictated by the state, and no individual can ever fully own any property.
Allodial system. The system used in the United States and much of the developed and developing democratic world.
In American-English legal theory, it is important to understand the difference between these elements of land, real property, real estate and associated rights, such as air, mineral and water rights. This chapter will discuss these elements in three categories:
1. Land. The ground surface and the natural elements below and above it.
2. Real Estate. Land and any improvements on it.
3. Real Property. Real estate and the different "rights" involved with it.
Most people treat the terms land, real estate and real property as interchangeable. They are not. Anyone who aspires to invest in real estate or work in the real estate industry must understand the key distinctions between these terms. Fortunately, they are not difficult concepts to grasp.
Land
In the real estate industry, the legal concept of land encompasses more than just the ground that we see or that comprises a parcel of property. Land includes everything natural beneath and above the surface. The operative term here is "natural"; but the concept of land need not be completely tangible.
It may be helpful to view land as an inverted pyramid extending from the center of the earth and projecting outwards into the atmosphere. Land includes, but is not necessarily limited to the following elements: Surface ground. This is what most people think of when they hear the term "land," but it's obviously much more.
Subsurface soil and water. Landowners have traditionally owned the water underneath their land surface and can access it at will. However, many local governments and new regulations have begun to exercise control over aquifers and other subsurface water sources.
Minerals, oil and gas. This is an extension of subsurface land rights. These elements are prime commodities and can give the property owner additional income-if that owner still controls the rights to those subsurface elements. For more information, see the "Subsurface Rights" article.
Airspace above the ground. Believe it or not, air space is part of real estate. For example, your neighbor cannot build an overhanging bay window that extends into your property's air space. An increasingly more common discussion of air space involve condominiums, in which the condo owner often only owns the air space within their units—but not the walls, floors or ceilings.
Permanently attached natural elements (trees, boulders and vegetation). The law does differentiate between permanent vegetation and annual crops. Trees, grass and perennials are called "fructus naturales" and are considered part of larger real estate. Planted annuals and crops are called "fructus industrials" and are considered personal property.
The concept of personal property, as opposed to real property, will discussed later in this article. As you can see, however, the land can contain both real property and personal property. Ownership of land can also be further divided into different facets-which allow for separate uses and manners of possession.
Example: Ownership of Land Sally owns a ranch. She learns that there may be precious minerals under her land. She would like to take advantage of this fact, without jeopardizing her ranch operations. So, Sally sells the rights to the mineral under her land without surrendering her land. The mining company that purchases the mineral rights is allowed to mine for it, within strict limits, while Sally is free to continue with her ranch operations.
Real Estate
The concept of real estate begins with land, but typically includes more. Real estate also includes all the artificial improvements to land, such as buildings, sewers, pavements, fences and wells.
When discussing real estate, we are talking about the entire property as a physical entity—soil, minerals, air space and all improvements. The real estate industry sees all of these as commodities that can be quantified, bought, sold and transferred.
In short, the term "real estate" starts with the land, but then includes all improvements made to that land.
Real Property
The term "real property" normally applies to the legal concept of property ownership. In our system of property law, there are different elements to ownership, especially with ownership of real estate.
When using the term real property, you should try to avoid thinking of the tangible, physical elements of real estate. Instead, you should view the term "real property" as a concept or idea. The key issue here is ownership, and the rights involved with ownership.
In this sense, what you own is not as important as how you own it. These elements or facets of property ownership are often grouped into a "bundle of rights" that include the following five: Possession. This facet of ownership pertains to the right to occupy the property. For example, a landlord gives the renter the right to temporarily possess, enjoy and exclude the property, but the landlord keeps the right to control its usage and the right to dispose the property to another person.
Enjoyment. This facet pertains to the right to possess the property without interference.
Control. This facet pertains to the owner's right to determine how the property may be used.
Disposition. This facet pertains to the owner's right to give, sell or transfer the property (either in whole or in separate "rights") to another individual. This right to dispose is one of the cornerstone of the real estate market.
Exclusion. This facet pertains to the owner's right to restrict other individuals from accessing or using the owner's property. Trespassing laws arise from this right.
When many people talk about property rights, it takes on an almost majestic set of rights. This goes hand in hand with American principles (or myths) about self-reliance, privacy rights and individualism. We may find an historical basis for this view of property rights in monarchial Europe, where landowners were essentially royalty and had near-absolute power over their dominions, no matter how small.
Even in America's allodial system, however, ownership is never infinite or unlimited. The government reserves the right to "take" any or all of the ownership elements from any private individual. However, the government must justify any such "taking" as being for the public good and the owner must be compensated the fair market value of the property taken. As long as the government meets these two conditions and follows due process, the property owner cannot prevent such a taking.
For example, when the state, county or city must build a new highway or street, they will need to buy the homes and properties in the path of the proposed road through a taking.
Another, more limited example, would be if the local county wanted to build a river-walk and took an easement through the property of the riverfront owners. The property technically still belongs to the property owner, but the easement gives the government full usage and control of the river's shore.
For more information about the government's ability to limit or take real property from their private owners, see the "Eminent Domain" article.
Real vs. Personal Property Most physical items can normally be classified into either real or personal property. This is an important distinction in the real estate industry and can translate into serious money.
The quick way to understand the difference between the two types of properties is to think of personal property, as everything not permanently attached to the real estate.
As noted above, real estate is land (with its included rights) and anything permanently attached to that land.
Personal property is legally called "chattel," most probably because defining the concept of personal property became a legal need when cattle became big business.
Attachment. The permanency of an item's attachment to the real estate determines whether it is real or personal property. For example, a pile of wooden posts would be considered personal property until they are driven into the ground to create a fence, at which time, they become part of the real property.
Transfer. Real property is transferred with a deed; personal property is transferred with a bill of sale.
With most home purchases, the deed transfers the land and house, while the bill of sale handles the transfer of the washer and dryer.
Per the preceding example, personally property can be converted into real property through the process of attachment. Fixtures are objects that were previously personal property but have been attached to real estate, thus making them real property. Note: try not to confuse regular fixtures with trade fixtures; trade fixtures, sometimes called chattel fixtures, are considered personal property. By the same token, real property can be converted into personal property through the process of severance.