Question

As you recall, Chapter 9 provided a broad view of the mortgage deed process and role of a promissory note. Chapter 10 expands the discussion to include the importance of a deed of trust. Nineteen states plus the District of Columbia use the Deed of Trust as the customary security instrument in the sale of real estate. YOUR ANSWER NEEDS TO INCLUDE AN UNDERSTANDING OF “TITLE THEORY”.

What is the practice in your home state? Assume you are a mortgage lender, would you prefer to use the Deed of Trust? Justify. My home state is Texas

Answer 1

While the ‘Title theory’ talks about the doctrine of property law for a mortgage transferring the legal title of the property to the mortgagee, who holds it until the mortgage has been satisfied. The Process of Mortgage Lending is somewhat similar to what has already been stated in the question itself. The basic systematic in the lending process would include:

Application Process.
Loan Processing.
Down Payment
Underwriting.
Closing up.
Signing Your Mortgage Loan at the Title.
Funding the Loan.
The process follows the Mortgaging of the property, whether it’s the home or company.

In case, lending involves financing for residential property, the Property Documents (judicially recognized) in the name of the individual serves the security or for mortgage purpose, which for valuation purpose is either more or equivalent to the sum lent. In case of the default, the lender can take the claim of the property and may auction it to recover the amount lent.

If the financing is done to a corporate or any company, usually a partnership deed or Trust in case of a partnership firm, formation document in case of other entity types, serves a mortgage representing the corporate ownership and value. In case of defaults the entitlement of the establishment gets transferred to the Lender.

So, in case of Mortgage lending, the lender takes the entitlement (in terms of possession & ownership) of the property upon the default on repayments on the mortgage lending.