Notes: What documents get Recorded in the county records?

9 Replies

I purchased some very low value newly originated notes that are in first position.  I purchased them approx 3 months ago and discovered that they had not yet got recorded in the county records.  I contacted the seller/property owner and asked when I will get the recorded copy of the deed.  She informed me that she had not had time to get it notarized and recorded yet.  She also informed me that it is the NOTE that needs to be recorded and not the deed?????? She also informed me that I would be receiving a copy of these documents and not the original.   At this point, although she is paying on the note on a regular and timely basis, I am feeling a bit vulnerable as the note has not been recorded in the county docs.    What if she stops paying and I need to foreclose?  What is to stop her from selling another note on the same property to someone else if it is never recorded?  Is there anything that I can do to get her to record it ASAP?  Additionally, I was under the impression that I would be able to retain the ORIGINAL  documents and that once the note was paid off, I would return the deed to her   and file a satisfaction of mortgage with the county.  Please educate me with what documents get recorded at the county level and what documents should be returned to me?

Thanks,

Sandy

@Sandy Uhlmann

Question 1: is it a note or a contract for deed you acquired ?

Question 2: are the notes originated in your name or someone else’s?

Question 3: is the seller also the borrower ?

I think we need more of the back story of the players involved in order to determine if it’s a deed, an assignment, a mortgage, an assignment of land contract etc that needs to be recorded

did not have an attorney or collateral company review the documents prior to acquiring?

@Sandy Uhlmann   

It sounds like you purchased a loan from someone else, and did not originate the loan.  That being the case, you should have the following:

  • Note - original copy - not recorded
  • Allonge - transfers ownership of the note to you - not recorded.  (Endorsement on the face of the note is also acceptable.)
  • Assignment - Assigns the Deed of Trust or Mortgage (depending on state) to you - this is recorded.  If you have an unrecorded assignment you can record it yourself, and indeed it is typically up to the buyer to do this. 

The above are the bare minimum elements.  Before you buy a note you need to get a title report so you can understand where things stand in terms of recorded ownership of the loan  and the property itself.  You will also be able to verify the lien position of the loan you are buying, as well as the tax situation.  It's super easy to get ripped off buying notes so be sure to do your homework.

@Sandy Uhlmann The Deed of Trust or Mortgage is the first thing that needed to be recorded. Did you get O&E reports during your due diligence before you bought the notes? The DOT/Mortgage gets recorded by the originator of the loan. (Or should be. Private lenders may choose not to record for whatever reason but, as you pointed it out, it leaves you vulnerable.)

Typically, you, as the buyer, will record the assignment when you buy the loan. The seller should get this document to you in a few days to a few weeks depending on your seller and how fast they can get the documents to you. Sometimes, it takes longer than a few weeks. Sometimes, sellers of loans won't record previous assignments, in which case you need to record multiple AOMs. Be sure that you record the assignments in the correct order.

@Wayne Brooks @Chris Seveney @Andreas Mirza@Mike Hartzog   
I wanted to thank you for your input and advice.  It is much appreciated.  Clearly, I should have done more due dil with these two low value notes.  I purchased the note from an investor/rehabber that apparently purchases  property very cheaply then borrows money for the rehab by creating a note.  They rehab the property and rent them out.  Payments have been on time every time thus far.  I am just concerned that if something does happen, I don't have a deed recorded with the county thus other than my money trail and paperwork that is just a copy, I am left with no proof that I am the note holder not to mention that if the borrower created another note my lien position can essentially get changed if that note gets recorded before mine.  Furthermore, the servicer will want a copy of the recorded document too.

 My paperwork it titled "Mortgage Agreement" and "Promissory Note"  I do have a signed but not yet notarized copy of the  mortgage agreement.  Makes me a bit more nervous the fact that they are insisting that it is the NOTE and not the DEED that gets recorded.  I have offered to record the deed myself but I do need an original notarized copy from the borrower to do so-correct?  Is there anything that I can do to get this deed recorded or am I totally at the mercy of the borrower?

Sandy,

Why didn't you ask us beforehand :/

It's pretty obvious that there is miscommunication between you and the other party. You realize that not all notes are secured right? 

For example I could lend you $1,000 and have you sign a promissory note, which would not be recorded. From your message above it sounds like you're lending for the repairs, not for the purchase of the house.

Are you 100% sure that you've agreed on a mortgage? Just because you add a title that says "Mortgage" on top doesn't make it so. And if so.. why the hell would you not have your attorney/closing agent run through it with you.. I lent my best friend some money to buy a fixer upper a few months ago and still had it run through a real estate attorney, because even though I trust him, what if he gets hit by a bus and can't pay me back?

Originally posted by @Patrick Desjardins :

Sandy,

Why didn't you ask us beforehand :/

It's pretty obvious that there is miscommunication between you and the other party. You realize that not all notes are secured right? 

For example I could lend you $1,000 and have you sign a promissory note, which would not be recorded. From your message above it sounds like you're lending for the repairs, not for the purchase of the house.

Are you 100% sure that you've agreed on a mortgage? Just because you add a title that says "Mortgage" on top doesn't make it so. And if so.. why the hell would you not have your attorney/closing agent run through it with you.. I lent my best friend some money to buy a fixer upper a few months ago and still had it run through a real estate attorney, because even though I trust him, what if he gets hit by a bus and can't pay me back?

 It might not be too late for you to get this recorded if you have a good relationship with the borrower/investor. Unless you have evidence that he's a shady investor, I would assume that he might not know what he's doing with notes.

First, how much time is left on the note? If he has 6 months of payments left, it might not be worth correcting since his payments are coming on time.

If it's longer, open a dialogue with the investor / borrower and let him know that your information tells you that the original notarized mortgage needs to be recorded. Advise him that you would like to do this correctly for your protection and his. Suggest that a title company or an attorney , whichever is appropriate, complete the transaction correctly. If he's a reputable, trustworthy investor, you should have no issues with this. Plus, you get to learn how to do this the correct way

at this point you have nothing.. and it sounds like you have a vendor who does not know what they are doing either.

you have no note no collateral.. this person worse case could just vanish along with your money  :)  not saying that will happen.

we ALWAYS in our business go through title and escrow just like a home purchase cost a few bucks but we know its insured we know it gets recorded we have settlement statement.. etc etc.. I think for folks like you that should be mandatory so you don't do what you just did and hand over money without securing your position..

In the future I recommend that you use a title company to do your deeds of trust and notes.  Pull a title report and treat it just like you are giving a mortgage/loan.  Just ask the person to whom you are lending money to pay the fees.