The strong protective equity provided by real estate collateral provides a measure of safety to trust deed investors not available in all high-yielding investments.
Collateral is a borrower’s pledge of specific assets, in this case commercial or residential real estate, to secure repayment of a loan. The collateral protects a lender in the case of a borrower’s default. Borrowers failing to pay the principal and interest under the terms of a loan agreement are said to default on the loan at which point they forfeit the property pledged as collateral and the lender becomes the property owner. Banks and private equity lenders like the Collateral Group use a legal process called foreclosure to obtain real estate from the borrower who defaults on a loan obligation.
Collateral is a borrower’s pledge of specific assets, in this case commercial or residential real estate, to secure repayment of a loan. The collateral protects a lender in the case of a borrower’s default. Borrowers failing to pay the principal and interest under the terms of a loan agreement are said to default on the loan at which point they forfeit the property pledged as collateral and the lender becomes the property owner. Banks and private equity lenders like the Collateral Group use a legal process called foreclosure to obtain real estate from the borrower who defaults on a loan obligation.
In the event of foreclosure, investors in first-position trust deeds underwritten by the Collateral Group will receive priority over other creditors on:
- Their initial investment.
- The interest owed as defined in the loan and servicing agreements.
- Their portions of the penalties, fees and default interest as outlined in the servicing agreement.
- 60% of all gross profits from the successful sale of the property.