A question about notes and mortgages.

8 Replies

Hi,

I've got a noobie question that I'm hoping someone can help me with. 

Its my understanding that when people use seller financing to sell a mobile home in a park, they are recording a note, but they aren't recording a mortgage. If this is wrong, please correct me. 

If a note alone is enough for you to repossess a home, then why do people record mortgages for ordinary real estate? Why is a mortgage necessary when selling real estate with seller financing, but unnecessary when selling a mobile home with seller financing? Is it because mobile homes are personal property as opposed to real estate? 

Is anyone able to clear this up for me?

@Bob Jones

Notes do absolutely nothing when we're talking about repossession.

Most people usually think of the mortgage or deed of trust as the contract they are signing with the lender to borrow money to purchase a property. However, that's not the case at all. It's the promissory note that contains the promise to repay the amount borrowed. Nothing more nothing less.

The mortgage or deed of trust is the document that pledges the property as security for the loan. It is the mortgage or deed of trust that allows a lender recourse (via foreclose) if the burrower fails to make the monthly payments and/or breaches the loan contract in some way or another.

When it comes to mobile property, it depends on what state you are in and how that state defines mobile property; each state has guidelines as to whether a mobile property is considered personal or real estate based on certain tests. I don't know about MD so I can't really help you there. In any case, I hope this clears some things up for ya.

@Khenkis K.

Yeah...I have a little bit of experience with real estate, and that's been my understanding of how things work. Everything you said makes sense. 

And yet, it seems that some people aren't recording mortgages when selling mobile homes. The two biggest names that I know of in the mobile home space are Lonnie Scruggs and John Fedro. I've studied a little bit of their material, and neither of them seem to be recording mortgages. Hence my confusion. 

I'm interested in pursuing the mobile home niche, but it seems that the big names are doing things that don't align with my understanding of real estate.  :/

@Bob Jones As with most things real estate, niches usually have their own state specific bylaws amongst their general real estate ones. So, understanding real estate itself (along with generic laws) is important before anything else in my opinion. You can learn that by either taking a real estate license prelicensure course or, better yet, just go burrow a book on real estate fundamentals at your local library!

I am not familar with Lonnie Scruggs or John Fedro but it appears they dabble with residential owner-financing in some form or another. If that's the case, I would highly recommend you trend very carefully and focus more so on whether what they teach adheres to Dodd-Frank and SAFE, aka major federal laws on residential financing transactions.

Originally posted by @Bob Jones :

@Khenkis K.

I've studied a little bit of their material, and neither of them seem to be recording mortgages. Hence my confusion. 

You're supposed to record a Lien against the title of the mobile home if you're owner financing.  States vary how this is accomplished, but if it's not real property then a lien is 99% of the time how it works.

These liens can be viewed on the State website with their Serial # etc type information and is submitted to the state upon sale.  In Texas, for example, these are included on the Statement of Ownership and Location (SOL).  Much like a lien on a car's title.

Good luck. 

Mortgages are only use for Real Property, real estate.  Mobile homes are not real estate, it’s either a lien on the actual title, like a car loan, or perhaps a UCC filing, which is for personal property.

Originally posted by @Bob Jones :

Hi,

I've got a noobie question that I'm hoping someone can help me with. 

 Actually the correct term is newbie... :-) We purchased a mobile home in Arizona and it had a deed of trust, so I would record it to let the world know you have an encumberance on it. I would assume mortgage states are the same. It was on a piece of property, and the wheels were removed, so that is different than one in a park that you are renting. In that case, its more like a vehicle with title.. Good luck!

We do owner finance but only for mobiles that are attached to land so that you in effect are creating a first mortgage position tied to a title/deed.  Without the land, you are only putting a lien against the home itself and it is more like repossessing a car vs. foreclosing on a property.  It is much easier/safer to buy mobile homes with land and turn around and re-sell them owner finance.  Check your local foreclosure auctions, there is usually not much competition and you can pick them up for reasonable prices.