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Escrow & Settlement


The funding of a loan or purchase of a promissory note and trust deed should be transacted through an "escrow". An escrow is opened when money, documents, instruments, and written instructions regarding the transaction (called escrow instructions) are conditionally delivered by the principals to a third party, called an escrow officer. The mortgage broker, lender, or both specify in the instructions what conditions must be met in order for the escrow officer to disburse your funds (fund the loan). These conditions include but are not limited to:

(1) Removal of certain liens, including liens or mortgage loans being paid off;

(2) Payment of delinquent taxes or HOA dues. 

(3) Execution and delivery of the loan documents, which includes the promissory note and deed of trust.

(4) Title insurance coverage. 

(5) Recording of the deed of trust (trust deed) concurrently    with the delivery of funds (lenders wire).

The information in the escrow instructions should be consistent with your understanding of the loan transaction. Be sure to compare the promissory note and deed of trust (trust deed) with what you were told at the time you agreed to make the investment (funding of the loan). Again, look at the documents closely to make sure the promissory note and deed of trust state the name of the borrower and you as the lender. Always ask questions if you are unsure of anything.

After Closing

The escrow instructions should require the loan documents, including the promissory note and copy of the deed of trust, to be delivered to you or an independent custodian (lawyer, or payment servicer) on your behalf at the close of escrow. The original deed of trust will be mailed to you or the independent custodian you specified usually within two weeks of closing. Keep all of these documents in a safe place.

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