The program does have a deed of trust on the property. This is usually only for $10. This is in place to protect the home in the program. The program wants to stop people from taking out a loan for more than they can sell the home for (being upside down on the mortgage). Also, during a sale the program wants to make sure the home is sold to an eligible person and at the affordable price. The program deed of trust makes sure the program learns of a refinance or sale – even if the owner forgets to tell the program. The program can then make sure the guidelines are followed.
Having a deed of trust on a home gives the holder rights in a foreclosure process. The oldest deed of trust has the most rights (the one recorded the longest time ago). Most of the time the original loan is the oldest deed of trust. The program deed of trust is usually second after this. Any new loan would then be third. Most lenders do not want to be low (third) on the list. They want the first and second deeds released so they can be first. The program will not release its deed of trust. However, the program will “subordinate” its deed of trust to the new loan (assuming the new loan meets the program requirements). This accomplishes the same outcome. It puts the new loan deed of trust ahead of the program’s.
