Notes and Trust Deeds. 8:30 a.m. 9:45 a.m.

Transcription

1 Session 10 Notes and Trust Deeds Saturday, October 25, :30 a.m. 9:45 a.m. Linda Hamilton, CSEO, CEI, Chicago Title Company Session Sponsored by Page 1 of 9

2 Presented by: Linda Hamilton, CSEO, CEI A Note is... a promise to pay a debt per the prescribed terms and provisions a negotiable instrument. It can be used as collateral, it can be sold personal property an asset to the holder thereof and becomes a part of their estate in the event of their death not necessarily always secured it could be unsecured as well What exactly is a Deed of Trust? A Deed of Trust is... the document which secures a Note by placing a lien on a certain property recordable, and should be recorded to establish priority over other liens different from a mortgage in that it s a 3 party document, whereas a mortgage is a 2 party document Types of Documents You May Need to Prepare: Seller Carryback Purchase Money Notes and Trust Deeds Purchase or Hard Money private party and investor loan instructions, Notes and Deeds of Trust Unsecured Promissory Note AITD (All-Inclusive Trust Deed) and Note Page 2 of 9 1

3 Seller Carryback Purchase Money Notes and T/D s: In favor of Seller, as their interest appears, or purchase money status may be jeopardized. Use Assignments to add non-owner spouses or establish sole and separate property. Instructions must match documents exactly. KNOW AND UNDERSTAND HOW TO PREPARE THESE DOCUMENTS AND DON T DEPEND 100% ON YOUR COMPANY S SOFTWARE! Seller Financing Addendum must be completed or clarified in supplemental instructions. The parties instruct you, don t guess! Is priority established? Modifications may jeopardize. Watch imputed interest. IRS Code 483 states that seller financed transactions (including AITD s) up to $2.8 million must contract for a minimum interest rate of 9.0% per annum or the applicable federal securities rate, whichever is lower Usurious terms, strange provisions, adjustable rates, late charges, prepayment penalties and vague or indefinable terms, silent (always a no-no) 1. Is there enough cash in this transaction? 2. What is the end result the parties are looking for? Are the rate and terms of the loan fully understood by all parties? Does this loan accomplish the parties goals? 3. Is the payment enough to cover the interest? 4. Is the interest rate greater than 10%? If so, does the loan qualify for an exception to the usury law? Is the property to be owner-occupied? Is the loan broker arranged? 5. Is the Note and T/D to be sold or assigned to generate cash or pay a broker? If so, are the necessary instructions and documents prepared and approved? (Remember, the Assignment of the Note must appear on the document if there is room for it.) 6. Is a balloon payment applicable? Is the proper provision included in the Note? 7. Is there a prepayment penalty and a late charge? Are they lawful? 8. Have I done everything possible to ensure that these document would stand up in court? (I know my company does not want to own this Note and Deed of Trust) Should I refer the preparation to an attorney? Does my company require the beneficiary to provide proof they are exempt from the new disclosure requirements? If the beneficiary is not exempt, does my company require the parties to deposit proof the disclosures have been made or that a disclaimer is included in the escrow instructions? What if I have knowledge the beneficiary is not exempt? What is my personal exposure, if any, if I prepare loan documents that are not in keeping with instructions and/or my duties as an escrow holder? What exactly are the exemptions??????? Page 3 of 9 2

4 Sellers and private lenders are automatically presumed to be loan originators unless they qualify for an exemption under Dodd-Frank. There are two ways for sellers and private lenders to qualify for an exemption. The first exemption applies if the seller or private lender finances only one property in any twelve month period and: The lender is a natural person, a trust or an estate; The lender did not construct the property; The financing has a fixed rate or does not adjust for the first five years; The financing i does not result in negative amortization. The other way for sellers or private lenders to qualify for an exemption is if they finance no more than three (3) properties in any twelve month period and: The lender is a natural person or organization (i.e., corporation, LLC, partnership, trust, estate, etc.); The lender did not construct the property; The loan is fully amortized (i.e., no balloon payment); The financing has a fixed rate or does not adjust for the first five (5) years; The borrower has the reasonable ability to repay the loan. Interest Included Note: Escrow Holder is instructed to prepare, on Escrow Holder s usual form, the Deed of Trust, as set forth above, and a Note to be secured thereby, in the amount of $200,000.00, to be executed by Buyer in favor of Seller as their interest appears of record, or order, payable at place designated by Payee, with interest from close of escrow at the rate of six percent (6%) per annum, principal and interest payable in monthly installments in the amount of $2,220.42, or more, beginning one month from close of escrow and continuing monthly to and including 5 years from close of escrow, at which time the balance of principal and interest then remaining unpaid shall become due and payable in full. Interest Only Note: Escrow Holder is instructed to prepare, on Escrow Holder s usual form, the Deed of Trust, as set forth above, and a Note to be secured thereby, in the amount of $250,000.00, to be executed by Buyer in favor of Seller as their interest appears of record, or order, payable on or before 1 year from close of escrow, at place designated by Payee, or order, with interest at the rate of six and one-half percent (6.5%) per annum, payable monthly beginning one month from close of escrow. Straight Note: Escrow Holder is instructed to prepare, on Escrow Holder s usual form, the Deed of Trust, as set forth above, and a Note to be secured thereby, in the amount of $300,000.00, to be executed by Buyer in favor of Seller as their interest appears of record, or order, payable on or before 2 years from close of escrow, at place designated by Payee, or order, together with interest at the rate of seven percent (7%) per annum, payable at maturity. Instruction to endorse Note: At close of escrow, Escrow Holder is instructed to endorse said Note, over signatures, to reflect interest accrual date and first payment and maturity dates in accordance with the foregoing instructions Sample Assignment Language: FOR VALUE RECEIVED, the undersigned do hereby assign, transfer and convey to all right, title and interest in and to the within Note, together with all rights accrued or to accrue under the Deed of Trust securing same so far as the same relate to this Note, (with recourse or without recourse). (The Deed of Trust must also be assigned) For spouse: I,, do hereby assign, transfer and convey all right, title and interest in and to the within Note to, a married as his/her sole and separate property. (The Deed of Trust must also be assigned) REMEMBER!! Assignments must appear on the actual Note if there is any room (front or back). Refer to: Pribus v Bush (1981) 118 CA3d 1003, 173 CR 747 Sample Note Provisions: Balloon Payment: This Note is subject to Section 2966 of the Civil Code, which provides that the holder of this Note shall give written notice to the Payor/Trustor, or his successor in interest, of prescribed information at least 90 and not more than 150 days before any balloon payment is due. Balloon Payment provisions are often times misused. It is only applicable when: 1. Property is 1-4 family residence 2. Term of repayment is over one year 3. The final payment is more than twice the amount of any of the immediately preceding six regularly scheduled payments or the Note contains a call provision 4. The Note is purchase money Late Charge (B & P Code ; Civil Code Section ): In the event any payment is not received by the holder hereof within 10 days of its due date, a late charge of 6% of the amount due may be charged by the holder hereof. (This late charge is applicable for residential, 1-4 units, owner occupied and reflects the minimum time and maximum amount. For commercial, vacant land or investment property, the late charge may be increased to 10%.) Right to Pre-Pay: Privilege is reserved of prepaying the unpaid principal of this Note in full or in part at any time without penalty. Due on Sale: In the event the property described in the Deed of Trust of even date herewith, securing the within Note, or any part thereof, or any interest therein is sold, agreed to be sold, conveyed or alienated by the Payee/Trustor, or by the operation of law or otherwise, all obligations secured by this Note and such Deed of Trust, irrespective of the maturity dates expressed herein, at the options of the holder hereof and without demand or notice, shall immediately become due and payable. (This provision, by reference, should be included in the Deed of Trust securing the Note as well.) REMEMBER!! ALWAYS HAVE YOUR PARTIES APPROVE ALL DOCUMENTS AS TO FORM AND CONTENT, IN WRITING, PRIOR TO THEIR ACTUAL EXECUTION. DON T CLOSE ESCROW WITHOUT IT!! Page 4 of 9 3

5 Partial Release Clause for Deed of Trust: The Deed of Trust securing the Note in the amount of $* shall recite: In executing, delivering and accepting this Deed of Trust and the Note hereby secured, it is mutually agreed upon by Buyer (Trustor) and Seller (Beneficiary) that so long as no default shall occur in the terms of this Deed of Trust or said Note, Trustor or his successor in interest shall be entitled to demand and receive, and Beneficiary shall provide, Requests for Partial Reconveyances of portions of subject property herein described upon additional payment for each lot in accordance with the following schedule, plus accrued interest on amounts so paid to the date of such payments, together with the cost of preparation and execution of the Partial Reconveyances demanded. Reconveyance Schedule: All such payments shall be applied upon the last amounts of the principal required to be paid according to the terms of the Note. Neither the acceptance of any such payments nor the issuance of such requests for Partial Reconveyance shall affect the liability of Trustor or the lien of this Deed of Trust, upon the remainder of the property herein described for the full amount of the indebtedness remaining unpaid. A note about pre-payment penalties: Instead of providing sample pre-payment clauses, following are the parameters set forth in Business & Professions Code Section : The principal and accrued interest on any loan secured by a mortgage or deed of trust on real property containing only a single-family, owner-occupied dwelling may be prepaid in whole or in part at any time but only a prepayment made within seven years of the date of execution of such mortgage or deed of trust may be subject to a prepayment charge and then solely as herein set forth. An amount not exceeding 20 percent of the unpaid balance may be prepaid in any 12-month period. A prepayment charge may be imposed on any amount prepaid in any 12 month period in excess of 20 percent of the unpaid balance which charge shall not exceed an amount equal to the payment of six months advance interest on the amount prepaid in excess of 20 percent of the unpaid balance. Civil Code Section provides:... may be prepaid in whole or in part at any time but only a prepayment made within five years of the date of execution of such mortgage or deed of trust may be subject to a prepayment charge and then solely as herein set forth. An amount not exceeding 20 percent of the original principal amount may be prepaid in any 12-month period without penalty. A prepayment charge may be imposed on any amount prepaid in any 12 month period in excess of 20 percent of the original principal amount of the loan which charge shall not exceed an amount equal to the payment of six months advance interest on the amount prepaid in excess of 20 percent of the original principal amount. Please consult with your legal counsel or management regarding the preparation of Notes with prepayment penalties and the appropriate clauses of your company s choice. Installment Note Interest Included $200, Hometown, California October 15, 2014 For value received, Mary T. Monroe and Alice A. Abbey (names exactly as vested on Grant Deed status and vesting only need appear on the Deed of Trust ( payor/trustor ) promise to pay to Juan Garcia, a married man as his sole and separate property (even if Mr. Garcia held the property as his separate property, his wife would need to execute Assignments of both the Note and Deed of Trust (now personal property) to make this vesting valid) ( payee/beneficiary ), or order, at place designated by Payee, the principal sum of Two Hundred Thousand and No/100 Dollars (spelled out) with interest from date endorsed hereon at the rate of six percent (6%) per annum, principal and interest payable in monthly installments in the amount of Two Thousand, Two Hundred Twenty and 42/100 Dollars (spelled out) ($2,220.42), or more, beginning, 2014 and continuing monthly to and including, 2019 (your instructions should provide that Escrow Holder may insert, over signatures, the first payment date and maturity date, as well as to endorse interest commencement date) at which time the balance of principal and interest then remaining unpaid shall become due and payable in full. (this Note is amortized for 10 years, payable in 5 years, so you may need a Balloon Payment clause) Principal, interest and all other sums which may become due in connection with this Note and the Deed of Trust securing same, shall be payable in lawful money of the United States of America. Should default me made in any payment when due, the whole sum of principal and interest shall become immediately due at the option of the holder of this Note. If action be instituted on this Note, I/we promise to pay such sum as the Court may fix as attorney s fees. Mary T. Monroe Alice A. Abbey DO NOT DESTROY THIS NOTE: When paid, this Note, with the Deed of Trust securing same, must be surrendered to Trustee for cancellation before reconveyance will be made. STRAIGHT NOTE (interest only) $250, Hometown, California October 15, 2014 On or before October 20, 2015(maturity date as instructed), for value received, Robert Johnson and Sally L. Johnson (names exactly as vested on Grant Deed, status and vesting need only appear on the Deed of Trust), ( payor/trustor ), promise to pay to Susan Wright, an unmarried woman (name exactly as seller held title to property), ( payee/beneficiary ), or order, at place designated by payee, the principal sum of Two Hundred Fifty Thousand and No/100 (spelled out, must match numeric amount above) - - dollars, together with interest from date endorsed hereon (or closing date, if known or instructed to insert), at the rate of six and one-half percent (6.5%) per annum, payable monthly beginning. (It is not necessary, nor proper, to state what the monthly interest amount is on an interest only Note. If a principal reduction should be made, the monthly interest amount would change, rendering the amount shown on the face of the note incorrect. However, if your clients insist, you may use the following clause: Provided there are no principal reductions or additions made during the term of this Note, the interest payments referred to herein shall remain at $ per month. Principal, interest and all other sums which may become due in connection with this Note and the Deed of Trust securing same, shall be payable in lawful money of the United States of America. Should default me made in any payment when due, the whole sum of principal and interest shall become immediately due at the option of the holder of this Note. If action be instituted on this Note, I/we promise to pay such sum as the Court may fix as attorney s fees. Robert Johnson Sally L. Johnson Page 5 of 9 4

6 DO NOT DESTROY THIS NOTE: When paid, this Note, with the Deed of Trust securing same, must be surrendered to Trustee for cancellation before reconveyance will be made. STRAIGHT NOTE $300, Hometown, California October 15, 2014 On or before October 20, 2016(maturity date as instructed), for value received, Robert Johnson and Sally L. Johnson (names exactly as vested on Grant Deed, status and vesting need only appear on the Deed of Trust), ( payor/trustor ), promise to pay to Susan Allen, an unmarried woman (name exactly as seller held title to property), ( payee/beneficiary ), or order, at place designated by payee, the principal sum of Three Hundred Thousand and No/100 (spelled out, must match numeric amount above) - - dollars, together with interest from date endorsed hereon (or closing date, if known or instructed to insert), at the rate of seven percent (7%) per annum, payable at t maturity. t (For a t true straight t i note t there are no payments, t and all sums, principal, i i l interest t t and late t charges, are due on the maturity date. Principal, interest and all other sums which may become due in connection with this Note and the Deed of Trust securing same, shall be payable in lawful money of the United States of America. Should default me made in any payment when due, the whole sum of principal and interest shall become immediately due at the option of the holder of this Note. If action be instituted on this Note, I/we promise to pay such sum as the Court may fix as attorney s fees. Robert Johnson Sally L. Johnson NAME Mr. Juan Garcia ADDRESS 234 Ocean View Place CITY Fun City STATE & ZIP California, TITLE ORDER NO ESCROW NO APN NO. Don t Forget! SHORT FORM DEED OF TRUST AND ASSIGNMENT OF RENTS (INDIVIDUAL) This Deed of Trust, made this 15th day of October, 2014 (date must match Note exactly), between Mary T. Monroe, a single woman and Alice A. Abbey, an unmarried woman (status only is required for a Trustor vesting is not required, but may be used if it is your company s requirement), herein called Trustor, whose address is 555 My Place Drive, Hometown, CA (Trustor s address is imperative, especially in the case of foreclosure. If no notice can be served, foreclosure may be delayed.) ABC Title Company, a California corporation, herein called Trustee, and Juan Garcia, a married man as his sole and separate property (exactly as Seller held title to property his wife must execute an Assignment of this Deed of Trust and the Note secured hereby to assure this vesting as his interest is now in personal property, not real property), herein called Beneficiary, Witnesseth: That Trustor IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS TO TRUSTEE IN TRUST, WITH POWER OF SALE, that property in Ventura County, California, described as: (Enter( the legal g description p here if you y use an Exhibit A,, don t forget g to attach it!) ) (If the Note contains a Due on Sale provision, it should be included in the Deed of Trust, by reference. If the Deed of Trust is not a first, it should contain a statement to that effect, i.e. This Deed of Trust is second and junior to a Deed of Trust recorded on * as Instrument No *, or recording concurrently herewith. TOGETHER WITH the rents, issues and profits thereof, SUBJECT, HOWEVER, to the right, power and authority given to and conferred upon Beneficiary by paragraph (10) of the provisions incorporated herein by reference to collect and apply such rents, issues and profits. For the Purpose of Securing: 1. Performance of each agreement of Trustor incorporated by reference or contained herein. 2. Payment of the indebtedness evidenced by one promissory note of even date herewith, and any extension or renewal thereof, in the principal sum of $_200, executed by Trustor in favor of Beneficiary or order. 3. Payment of such further sums as the then record owner of said property may borrow from Beneficiary, when evidenced by another note (or notes) reciting it is so secured. To Protect the Security of This Deed of Trust, Trustor Agrees: By the execution and delivery of this Deed of Trust and the rate secured hereby, that provisions (1) to (14), inclusive, of the fictitious deed of trust recorded October 23, 1961, in the book and at the page of Official Records in the office of the county recorder of the county where said property is located, noted below opposite the name of such county, viz.: COUNTY DATE BOOK PAGE COUNTY DATE BOOK PAGE COUNTY DATE BOOK PAGE COUNTY DATE BOOK PAGE (which provisions, identical in all counties, are printed on the reverse hereof) hereby are adopted and incorporated herein and made a part hereof as fully as though set forth herein at length; that he will observe and perform said provisions; and that the references to property, obligations, and parties in said provisions shall be construed to refer to the property, obligations, and parties set forth in this Deed of Trust. The undersigned Trustor requests that a copy of any Notice of Default and of any Notice of Sale hereunder be mailed to him at his address hereinbefore set forth. How to Recognize & Handle a Private Party Loan (even if it s disguised as an institutional loan) Many cash transactions, and some new loan transactions, are now utilizing private party funds (commonly referred to as hard money loans). These loans require special handling, so to assist you in differentiating between an institutional loan and a private party loan, here are some tips on how to recognize and handle these types of transaction: The beneficiary (actual lender) will appear as an individual name(s), trustees of a trust, a 401k trust, a pension plan trust and, in some cases, an LLC, partnership or corporation that isn t licensed to make loans. Don t confuse the actual lender with a party sending you instructions that come from a mortgage broker who may be acting on behalf of a private party lender. Some of their instructions look exactly the same as an institutional lender, so pay close attention to the actual beneficiary under the Note and Deed of Trust this is your actual lender not the party who sent you the instructions. A mortgage broker cannot sign on behalf of a lender (unless they provide a valid Power of Attorney), including a private party lender, so the actual lender needs to sign your loan escrow instructions and any instructions that may come through their mortgage broker. You may get resistance from mortgage brokers, if you do, stay firm and get your management or legal counsel involved for support. If you aren t sure if the beneficiary is a private party (as in the case of an LLC or corporation), run their name through the Department of Corporations website at This will show you if your lender is licensed to lend money in the state of California. If a Deed of Trust is to be recorded in favor of a private party through your escrow, it is a loan, no matter what the parties in your escrow call it or how much they insist there is no loan. If a Deed of Trust is to be recorded, you should open a loan escrow to handle the funds and record the documents. Page 6 of 9 5

7 Continued: If your lender (beneficiary) is a trust, the beneficiary/payee on the documents must contain the names of the trustees, the name of the trust and the date of the trust whether you draw the documents or they are drawn outside of escrow and handed to you. If the lender is an individual, their names, status and vesting must be provided and shown as the beneficiary/payee on the documents whether you draw the documents or they are drawn outside of escrow and handed to you. If your lender is a corporation, partnership, LLC or other entity, their full name must be provided and shown as the beneficiary/payee on the documents whether you draw the documents or they are drawn outside of escrow and handed to you. If multiple beneficiaries are involved, your title company/department may not be able to issue title insurance. Check with your title company/officer as soon as you are advised you have a multiple beneficiary loan. Watch Exhibit type attachments containing complete beneficiaries names. Title will need to see your lender instructions (your loan instructions and/or instructions provided to you) as early as possible in the transaction. Some instructions request title coverage your title company may not be able to provide, so confer with your title officer. Send your documents at the earliest time possible so title can review and approve them. They have their own underwriting requirements when it comes to insuring private party loans. Contrary to popular opinion, hard money loans encompass all nonpurchase money loans Borrowing from Mom and Dad, an investor, a friend, the bank or an institutional lender all result in hard money loans if the funds are not used for a purchase If asked to process a hard money loan escrow, KNOW YOUR NOTES! Learn the differences between principal and interest, installment, straight, interest only, etc. and how to prepare the documents properly. There will be no financing addendum to steer you, so be prepared to ask the right questions When processing a sale and the buyers are obtaining financing from a private party/investor, open a separate loan escrow, take instructions and don t transfer the lender s funds until the day of closing. Once the funds are transferred to the purchase escrow, they become the buyer s money and may be jeopardized in a last minute delay or cancellation. If the transaction is subject to California withholding: The parties must complete a form 593-I and the buyer must withhold on each installment made to seller an amount equal to 3.33% of the installment (payment) and remit to FTB Take clear instructions and be as sure as possible the parties understand the process Add a disclosure to the Note stating the Note is subject to California tax withholding. This way, in case the Note is assumed the new buyers will be aware. If the Note is sold this disclosure will help ensure the withholding is completed from the proceeds going to the Beneficiary selling it. If the transaction is an exchange and the Note is payable to the seller, withhold on the Note amount only, taking the funds from the money going to the accommodator. The installment sale takes priority over the exchange. Page 7 of 9 6

8 Private Party Loan Checklist (Information to be completed by Lender/Beneficiary) Type of Note (please check one): Straight (all due at maturity) Interest Only payments Interest Included Loan Amount: $ Interest Rate: Payable: Monthly Quarterly Semi-Annually Annually At Maturity Interest starts when? Date At closing Other Late fee (circle one): Yes No Days: Percentage or Amount Due on Sale Clause? (circle one) Yes No Prepayment Penalty? (circle one) Yes No Balloon Payment Notice? (circle one) Yes No Buyer Occupying Property? Yes No Other provisions: Deed of Trust lien position on property (please check one): 1 st 2 nd 3 rd Beneficiary name(s): Beneficiary(ies) vesting Beneficiary(ies) address Beneficiary(ies) contact number: e mail: Other Information: If Deed of Trust is a second or other junior lien: Request for Notice of Default? (circle one) Yes No Request for Notice of Delinquencies? (circle one) Yes No Hazard Insurance Required (circle one): Yes No If yes, please provide mortgagee: Standard CLTA Lender s Policy Required: (circle one) Yes No Broker/Lender fees? (circle one) Yes No If yes, please attach demand for fees. Broker s Instructions, if any: Completed by: Date: Sample Phrases for Private Loan Escrow Instructions: Close Concurrently/Transfer of Funds: Escrow Holder is instructed to record the documents prepared through this escrow concurrently with documents recording through Escrow Number *** held at The Best Escrow Company. Upon recordation of the documents, Escrow Holder is instructed to transfer loan proceeds from the within escrow to such Escrow Number *** for the credit of Borrower herein (Buyer therein). Interest Pro-ration to Facilitate Payments Due on the First of Each Month: To facilitate the first and subsequent payments on the new Note described herein payable on the first of each month, Escrow Holder is instructed to charge Borrower and credit Lender with a sum equal to per diem interest from close of escrow to the first of the first month following close of escrow. The first payment on the new Note shall be due and payable on the first of the second month following close of escrow and on the first of each month thereafter as described above. NOTE PREPARED OUTSIDE OF ESCROW: The undersigned parties have handed Escrow Holder a Straight in the amount of $*, dated *, in favor of *, to be executed by *. All parties acknowledge that Escrow Holder did not prepare the Note and shall not be liable or responsible for the terms, validity, sufficiency and/or enforceability of the contents contained therein. In the event of a foreclosure, the parties are aware that * (trustee named in the documents) may not perform the foreclosure services, and a substitute trustee may need to be designated. Tips for Preparing/Processing Private Loan Escrow Instructions: Insist that all parties execute your instructions, including the issuance of title insurance. DO NOT accept a mortgage broker s signature on behalf of the lender unless they provide you with a Power of Attorney. Insist that the mortgage broker, if any, provide clear instructions if they are to be paid through escrow. Be clear about who will be paying the fees for this escrow. Possibly you want to take an instruction that all fees will be paid through your purchase escrow. Check with management regarding fee payment arrangements. Make sure the loan funds are deposited in the loan escrow and not transferred until the documents have recorded. This way your private lender is protected. Take an instruction in your purchase escrow acknowledging the concurrent recordings, but be cautious about adding loan contingencies that haven t been agreed upon. Have all documents approved by both lender and borrower. Unsecured Promissory Note May be preferable to secured Note for property with no equity Can be used to obtain a judgment which can then be utilized to attach all property owned by debtor, including personal property and wages Commission carried by broker Assign portion of purchase money T/D & Note Prepare a junior T/D & Note and assign Never draw a Note and T/D directly in favor of the broker Would result in a hard money loan and could expose the broker to the new disclosure regulations Unlawful for a broker to lend money to earn commission Page 8 of 9 7