Tips for analyzing the chain of title for your title documents
What is chain of title?The chain of title refers to tracking the ownership of a promissory note and deed of trust from origination of the loan to the current holder of the note and deed of trust. A promissory note is the document that evidences your promise to pay. The Deed of Trust is the title to the house.
Example. You want to buy a house for $300,000.00. You go to Bank of America for the loan. You then sign a promissory note for that amount and the deed of trust in favor of Bank of America.
Indorsement & AssignmentPromissory notes and deeds of trust are frequently sold and transferred. Each time a note and deed of trust transfers, there should be both an indorsement of the note and an assignment of the deed of trust.
Indorsement on the note is much like signing a check. The promissory note functions like a check. Just like if you wrote a check, banks must indorse the promissory note to transfer it. Sometimes, for simplicity, a note may be signed in blank. This is effectively the same thing as a blank check.
An assignment of the deed of trust is a document that shows transfer of the deed of trust. This should occur each time a deed of trust transfers.
Potential Problems With Chain of TitleSome examples of indorsement issues:
-note not indorsed at all
-note indorsed to wrong person
-indorsement not readable
-indorsement not signed by proper party or unauthorized party
Some Examples of Issues with a Deed of Trust:
-property address incorrect
-names of parties incorrect
-missing or incorrect legal description of the property
Some examples of Assignment of Deed of Trust Issues:
-not all transfers are accounted for
-assignment shows transfer from original lender to someone deep down the chain, skipping over one or more previous owners of the deed of trust
-backdating of transfer
-notary errors such as claiming personal appearance when parties are in different states
These lists are by no means exhaustive. If you suspect errors in the chain of title, seek an attorney with experience analyzing title documents for advice.