Lost Note / Trust Deed Bonds Explained

Lost note / trust deed bonds (or lost trust note bond) are a type of Surety bond. If you have paid off the lien on your property, but do not have a reconveyance of the deed or the company that placed the lien on your home is no longer in business, your title company or financial institution may want you to obtain a Lost note / trust deed bond before you can refinance or sell your home.

*Reconveyance-The act or process of transferring the title to the property from the trustee back to the borrower when the loan is paid in full.

A lost note bond allows title to transfer on a property by guaranteeing financial protection to your title company or financial institution or other lender in the event that an unpaid original lost note / assigned note surfaces after a borrower has claimed it to have been paid off. It protects the financial institution against any liabilities that may arise if the original deed is recovered in future and found to have not been satisfied.

How Much Should You Expect to Pay for a Lost Note Bond?

The bond rate varies depending on the age of the note and the availability of payoff evidence.

Documents Required to Obtain a Lost note / trust deed Bond

Some documents required to obtain a Lost note / trust deed bond include a copy of the preliminary title report, a copy of the deed of trust and copies of canceled checks or escrow documents or any other proof of payment. The title company is responsible for determining the bond amount, but California Civil Code 2941.7 (b) calls for a bond of twice the original note amount.

To apply for a Lost note / trust deed bond, you are required to fill out a Surety bond application. When filling out the application, be sure to provide accurate and up-to-date information or your application may be rejected. Depending on the amount of the bond, you may be asked to submit your financial statements. If your property is vested in a trust, remember to provide a copy of the trust document.

How Long Does Underwriting Take?

Generally, underwriting depends on the amount of the bond, age of the note and payoff evidence. Bonds with a value less than $100,000 have the potential for expedited approval. If the value of your bond exceeds $100,000, the Surety may need you to provide additional information and may get back to you with questions about your loan after you file your application, so you can expect the process to take longer.

How to Avoid Claims on Your Lost Note Bond?

Before you put money down, make an effort to understand bond language. Understand your responsibilities as the Principal. If the Surety files a claim against your bond, do not panic. Maintain close communication with all the parties involved including the Surety and cooperate with them.

What is a Lost Note Bond Declaration?

The declaration is a legal declaration by the seller or owner of the property. People often confuse what it is and whom is responsible for it because it’s erroneously referred to as a “Bond” declaration, because it is called for in the same code section that allows for a bond to be given. It really has nothing to do with the bond itself or bond company and no one beside the seller / owner should ever complete it since it’s a legal requirement of the seller / owner.

H.M. Vreeland is one of the most trusted Surety bond companies in California. Our unparalleled expertise in Surety bonds sets us apart from our competitors. To learn more, call (415) 566-3401.