Tag Archives: its
What Is A Deed Of Trust?
If you live in Alaska, Arizona, California, Colorado, Georgia, Idaho, Illinois, Mississippi, Missouri, Montana, North Carolina, Texas, Virginia, or West Virginia you probably dont have a mortgage, even if the bank, your friends and common chatter call it one. Its more probable that you own your home through a Deed of Trust: something thats a lot like a mortgage but not exactly the same. For legal purposes, mortgages and Trust Deeds are two completely different instruments.
Dont assume that the laws around one apply to the other. Unfortunately, because theyre the most common way of transferring title in over a dozen states, some sloppy commentators confuse the issue by calling Deeds of Trust “mortgages” anyway. Before you do anything with your note, find out exactly what youve got. Dont trust phone conversations. Instead, take a look at your papers or better yet, get a lawyer to look at them.
Obviously, this article is not legal advice but we can give you some informal tips about the key features behind a Trust Deed. They are:
Title to a Trustee: The big, distinctive feature of a Deed of Trust is that its an agreement between three parties: a borrower, a lender and an impartial third party: the trustee. The propertys title goes to the trustee until its paid off, though the borrower can take possession of the property as soon as everybodys signed off on the agreement. Nevertheless, the fact that the trustee has legal title to the property is a significant factor that influences what happens in emergencies such as non-payment of the loan. Trust Deeds are commonly held by a title company.
Promissory Note: Trust Deeds use promissory notes to set down evidence of the debt. The note defines the debt and its conditions, (such as the amount, interest, etc.) so its absolutely necessary to make sure everythings accurate. The lender retains the note until the borrower pays the loan off, after which it is marked “paid in full” and transferred to the borrower.
Rapid Foreclosure: As we mentioned, the trustee has the propertys title, which means that it can initiate a foreclosure and sale itself. For various reasons, most trustees appoint another, separate trustee to handle this. In the event of a default in payment the trustee puts notice in public records for 90 days, initiates 21 days of newspaper advertising and then sells the property. The trustee doesnt even need to take anyone to court. This sale is final, but a borrower can prevent this by coming to some arrangement during the 90 day period of record.
If you think youve got a Trust Deed, take a close look at your papers. Deeds of Trust and promissory notes can both be sold for substantial payouts.
Funding Circle for Business Loans
Peer-to-peer lending sites are still a growing phenomenon in the UK. Their publicity efforts tend to centre on their benefits for investors, mainly the relatively high interest rates they offer to savers. The success of the sites depends on winning over lenders looking for a home for their savings: there is less material out there about their advantages from the point of view of borrowers.
Its assumed that potential borrowers, particularly business borrowers, will find their own way to the sites with minimal encouragement, given the tight credit market of recent years.
If you run a company thats in need of investment, the financial climate isnt easy. Its hard to get backing from the banks, even for small loans. What are your options? Of the top three UK peer-to-peer sites, the biggest one for business borrowing is Funding Circle (FC).
Who can borrow through Funding Circle?
A business is eligible to apply for a loan of between £5,000 and £1,000,000, if it
* Has a turnover (not profit) of over £100,000 per annum
* Has filed accounts at Companies House for at least two years
* Is a limited company or LLP, not a business run by an individual or a partnership
The loans are repayable over a period between six months and five years. A personal guarantee for the loan is expected in all cases, and for larger loans over £100,000, the site requires security to be given, either on a specific asset to be bought with the loan proceeds, or generally over company assets.
How does it work for borrowers?
A business needing to borrow must initially complete an online application. Funding Circle estimates that should take about 20 minutes. They aim to process the information, complete routine checks, and revert to the borrower with a decision within two days.
FC will do a credit check with Experian, and will also check with CIFAS as to whether any fraud has been recorded in connection with a company director.
The borrowers proposal may be accepted or rejected outright, or Funding Circle may request modifications in the terms or the security required. In some cases, the company may be restricted to borrowing a smaller sum that they had intended. Depending on FCs assessment of the borrowing companys financial strength, and the degree of risk in lending to them, the loan request, once accepted, will be assigned a risk band which determines the range of interest rates allowed for the loan. The rates range between 7.2% and 11.5%, as at November 2013.
Once agreement has been reached on terms, the loan proposal will appear on the FC website, with information about the companys credit rating, accounts, and the purpose of the loan, together with details of any guarantee and/or security.
Within the assigned risk band, lenders can offer to lend money at their chosen rate, which is driven down in a reverse auction as successive lenders place their bids. The more popular the lending proposition, the quicker the interest rate will go down. It usually reaches the minimum for its particular risk band, but may not do so if the proposal doesnt appeal to the lender members of the site.
Appealing to lenders
To ensure the best chance of your proposal attracting the lowest interest rate for its band, make your proposal full and convincing. Describe your company mission and values, and explain why you need the money as precisely as possible.
Make sure that any issues with your credit score have been resolved with Experian as far as possible, as the company credit rating is very important to lenders. Above all, answer their questions as promptly and fully as you can, even when, as is sometimes the case, they are phrased less than diplomatically. Far fewer people will lend on a proposal with unanswered questions outstanding, or with questions they think arent answered fully.
After the auction
When the loan is fully funded, usually at the minimum rate for the band, the borrower must decide whether to accept the proposal or not.
If its accepted, the loan, consisting of 10s or 100s of small slices coming from individual investors, will be administered by FC who will distribute the repayments between the investors and chase up late payments. They will be responsible for collecting the debt through the courts if necessary, and will enforce any guarantee or security, should the loan go bad.
If you are thinking about borrowing through Funding Circle, its a good idea to get familiar with the website and watch a few auctions first. You can get an idea of the process and also the sort of questioning you may face from potential investors.