Mortgages and deeds of trust are subject to a large number of technical legal rules. Do NOT try to draft one yourself; you should always either use one of the standard forms, which can be provided by your broker, escrow company or attorney, or you should have an attorney draft the document. If you try to do it yourself, and make mistakes, then the mortgage or deed of trust might not be enforceable. In our practice, Gibson Law PC has seen the consequences of people trying to draft their own mortgages or deeds of trust; we have seen people lose their properties, or lose huge sums of money, because they wanted to save the money of using an attorney or a real estate broker. It costs relatively little to hire a lawyer to draft the documents, or to use standard forms; you can easily lose the entire value of the property if you do not do the documents right.
The basic requirements of a mortgage or deed of trust are as follows. This is NOT a complete list of what is required; this is only a short list of basic elements. First, it must be in writing; a mortgage or a deed of trust is an interest in real property which is subject to the Statute of Frauds. The borrower must sign the writing.
Second, there has to be some underlying obligation which the mortgage or deed of trust secures. A mortgage or deed of trust cannot just hang in the air; it only has legal meaning if there is some debt or other obligation between the parties for which it provides support. In most transactions, the debt supported by the mortgage or deed of trust will be in the form of a Promissory Note.
Third, the real property, which is the collateral, must be adequately described. The safest way to do this is to provide a legal description of the property. It is also common, and a good idea, to provide the street address, and the assessor’s parcel number (APN). Since errors can creep into all of these forms of description, it is prudent for a lender, or other party holding a mortgage or deed of trust, to purchase title insurance insuring the lien.
Fourth, to be enforceable against third parties, the mortgage or deed of trust must be recorded in the official records of the County in which the property is located. When the borrower signs the mortgage or deed of trust, it is enforceable, as between the lender and the borrower. The lender, however, does not acquire rights which are enforceable against anyone else until and unless the document is properly recorded.