MORTGAGE DOCUMENTATION
Deed -- The Conveyance
Policy 22 requires affiliates convey marketable title at closing. Marketable title is title that
includes standard and reasonable exceptions acceptable to the buyer.
• Warranty Deed - warranty extends back to property origins and is not limited to
time of grantor’s ownership
• Limited Warranty Deed (preferred) - warrants property as free of all liens and
encumbrances made by and through grantor, subject to a list of exceptions
• Quit-Claim Deed - no warranty / “as-is”
A “right of repurchase” is required by Policy 22. If this right is in the deed or a separate
document, it will not disappear when the mortgage is paid off.
• Right of first purchase (preferred method):
 Affiliate is given opportunity to purchase home before homeowner tries to sell it.
 Purchase price is pre-determined.
• Right of first refusal:
 Affiliate must usually match a third party offer.
 Often ignored by other parties.
 Many buyers will not make an offer on a home with a right of first refusal.
Promissory Note – The Loan
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Establishes the borrower’s “promise to pay”
Must have original Promissory Note to enforce debt in court
Keep it simple – no need for provisions in the note beyond basic legal requirements
Promissory Note should contain:
• Principal amount owed
• Amount of monthly payments (excluding taxes and insurance)
• When and where payments are due
• First and last dates (maturity date) that payments are due
• Define default and set cure period
• Customary disclaimers (notice of presentment, dishonor)
• Borrower’s and Affiliate’s accurate and complete legal name
Deed of Trust – The Security
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Secures the payment; provides remedies for default, including affiliate’s right to
foreclose
Must refer to an existing Promissory Note dated on or before the date of the Deed
of Trust.
Must be recorded with proper governmental entity (usually county)
Should accurately state:
 Borrower’s name
 Principal amount of Promissory Note
 Date of Promissory Note
 Some states may require more terms –watch for changing laws!
Must have a legally sufficient description of the property
Must include express foreclosure or power of sale provision (to proceed with nonjudicial foreclosure)
Include requirement that Habitat home must be homeowner’s primary residence
Most Common Errors with Mortgage Documents:
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Amounts, names or dates do not match on Promissory Note and Mortgage
Affiliate or homebuyer name is not correct
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Omitting monthly payment amount
Failing to provide for adjustment of escrow amounts
Incomplete or otherwise insufficient legal description
Not including “power of sale” – precludes non-judicial foreclosure
Improper execution (state specific), including proper witness and notary acknowledgment
Omitting requirement that the home will be the homebuyer’s primary residence
Not performing full due diligence review when acquiring the property
• Title defects, environmental or zoning issues impact ability to convey good title
Not recording the mortgage immediately, or in wrong order (after the deed)
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Not maintaining original mortgage documents in safe location (and keep copies if
outsource servicing)
Allowing homebuyer to move into the home before the mortgage is executed and
delivered (limited exceptions require occupancy agreement and specific date for
title transfer)
For Mortgage Loans for Repair Products: not providing required 3 day right of
Rescission