“Now,” Nancy continued, “let’s cover two very important documents. The note and the trust deed. Here I have a standard St. Louis County note.” She held up a piece of legal-sized paper for us to see. “When filled out, it shows the amount of the loan that is being made to you, the interest rate, the amount of the monthly principal, interest and payments, and when the payments are due. This note in turn is secured in the state of Missouri by a deed of trust. A deed of trust actually secures the amount of money that the lender’s lending you on this note with theproperty that you’re buying. In other words, if you don’t pay that note, the trustee for the bank will foreclose on the property.”
“To say it in fewer legal terms,” I added, “A note is an I.O.U.”—I promise to pay you this much” The seller says, ‘I believe you but just to be sure I want you to sign this other piece of paper called a trust deed, or mortgage” It says, ‘If you don’t keep your word, you’ll have to give the property back” There are other ramifications, but this is the general
picture. Speaking of foreclosure, there were people who this very day, about an hour ago, lost their property.”
“Yes,” Nancy said, “it happens almost every day, at noon, on the steps of the courthouse.” “Why?” Steve wondered. “They didn’t live up to their agreement with the lender,” I answered. “They didn’t make their monthly payments—due to divorce, neglect, bankruptcy, unemployment, all kinds of reasons. Dealing in foreclosures is tricky, so I’d be careful.
Taken From:The ROAD TO WEALTH