In this section, we will try to bring you timely and informative title tips – tips that will be of value to you whether you are a realtor or a lender. Again, it’s the little details that help us all become the professionals our clients expect us to be. Please feel free to send us your feedback, comments, or questions.
March 29, 2012:
Did you know that “a private party lender in Colorado is a term used in the title business to identify any person or entity who is NOT permitted to execute a Request for Release of Deed of Trust Without Protection of Evidence of Indebtedness (CRS 38-39-102 and 38-38-100.3(20).
A private party may be an individual or individuals, a partnership, a corporation, trust, LLC or other entity. A private party lender might be an entity with a name that includes the word “mortgage”, “lending”, “loans”, etc., but this does not mean that they are a Qualified Holder under Colorado law that may process a release without the ORIGINAL evidence of debt (Note) being presented to the Public Trustee.
Generally, anytime there is a payoff of an existing lien evidenced by a Deed of Trust, and the payoff individual(s) or entity, regardless of the form of the entity, is NOT a federally or state chartered bank, savings and loan, or credit union, the ORIGINAL evidence of debt, or note, must be presented to the Public Trustee to obtain a release of record. In these cases, absent the note, a commercial surety bond is required in an amount 150% of the original amount of the debt and must be purchased for the benefit of the Public Trustee. These bonds can be extremely expensive to obtain.
Basically, as an underwriting requirement, any private party payoffs that are paid in conjunction with an insured refinance or resale transaction must be exchanged for the ORIGINAL note marked “PAID IN FULL” (unless a partial release) and an executed Request for Release of Deed of Trust from the holder of the debt at the time of the closing and at least contemporaneous with the payment thereof.”
Attorneys Title Guarantee Fund, Inc. – Title Notes – February 1, 2012
TIP: If you are a realtor working with hard money lenders, private parties, family members, or trusts and they are providing financing for Colorado real estate transactions, BE SURE to remind the parties involved that they must keep the ORIGINAL NOTE in a safe place and know where the safe place is. Private party loan payoffs and subsequent releases may take many years to surface after a closing. How painful will it be if the ORIGINAL NOTE is misplaced or lost or your title company fails to present you with this REQUIREMENT.
Make this an opportunity for you, the realtor, to separate yourself from the crowd when you can coach your client on the requirements of PRIVATE PARTY FINANCING.